Weaker-than-expected house data raises hopes of an interest rate cut
The Halifax has revised its price predictions for the year. It expects house prices to fall further over the course of 2008. Another leading lender Nationwide gave similar indications earlier this month after declaring that house prices had fallen for five months in a row.
Analysts state that the ‘weaker-than-expected’ data from the two agencies would raise hopes of the Bank of England (BoE) cutting interest rates by minimum 25 basis points in the near future.
However, since the lack of liquidity in the current money market is making it costlier for banks to borrow, any rate cut benefit may not be passed on to mortgage holders, market observers say. According to the chief economist of the Royal Institution of Chartered Surveyors, Simon Rubinsohn, the sharp fall in the Halifax house price index in March indicates the increasing pressure on the residential market even as lenders continue ‘to scale back their activity in the market.’
He added: “Loan-to-value ratios are getting lowered at the same point as borrowing rates are being increased, putting additional pressure on first-time buyers having to find ever larger deposits.”