Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

UK Interest Rates held at 5.5% and on Target for 5% by September 2008

Interest-Rates / UK Interest Rates Jan 10, 2008 - 10:34 AM GMT

By: Nadeem_Walayat

Interest-Rates

The Bank of England held interest rates at 5.50% following Decembers 0.25% cut from 5.75%, with the trend inline with the Market Oracle forecast as of 22nd August 07 for UK interest rates to fall to 5% by September 2008.

Yesterdays news of the continuing deterioration of the UK economy as over indebted consumers cut back on consumption as illustrated by Marks and Spencer's announcement of a drop on Christmas sales and calls by company's chief executive, Sir Stuart Rose, joined in calls for the Bank of England to cut interest rates to stimulate the economy, would have been countered by the increasing inflationary pressures as Gordon Brown seeks to restrain the public sector pay via a three year pay deal. Which is likely to lead to major tensions with the Unions.


The Market Oracle forecast as of 22nd August 07 , is for UK interest rates to fall to 5% by September 2008, with the first cut originally scheduled to occur in January 2008 . Given the sharp drop in the housing market and signs of a fast weakening economy, the first cut occurred a month earlier than forecast i.e. December 07. However, UK inflation is expected to continue rising into January, with the Market Oracle forecast for UK inflation to peak during January 2008 and then decline sharply to below 3% by November 2008 (RPI) , which will ensure the Bank of England keeps cutting interest rates during 2008 after a brief pause, the next cut is now scheduled for March 08.

The UK housing markets fast deterioration is expected to result in annualised UK House price inflation going negative for the first time since the early 1990's by April 2008, this is expected to be followed by a sharp fall in house prices as the buy to let sector rush for the exit to take advantage of the Uk capital gains tax change effective from 1st April 2008.

The Big Freeze continues to tighten on the UK commercial property market with Britain's fourth biggest insurer, Friends Provident freezing its Property Fund in December and thereby denying over 110,000 investors the ability to liquidate their investments. The unfolding crash in the commercial real estate market may the biggest in 27 years as valuations are cut on holdings of the UK's £700 billion commercial property market. As highlighted periodically over the last 6 months, funds running short of cash in the wake of investor redemptions will be forced to sell properties and thereby driving down commercial property values in an ever increasing downward spiral.

The Market Oracle forecast is for a 15% drop in UK House over the next 2 years with London expected to drop by as much as 25%, as of 22nd August 07. (the below graph will be updated on Halifax's data release later this month).

Despite the December rate cut, the UK property market remains at historically high unaffordability levels as illustrated by the Market Oracle UK House Price Affordability Index (Sept 07).

UK House Price Affordability Index

The minutes of the meeting will be published at 9.30am on Wednesday 23 January.

By Nadeem Walayat

Copyright © 2005-08 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

ian
10 Jan 08, 16:58
UK House Price Crash

Crash it will be in 2008.

What analysts ignore is that the record borrowings are for an ever lower quality of the property. I first bought a detatched house 25 years ago and if I look today at the multiple of income of the house price to salary it was maybe 4 at most - that same house today, for a new qualified chartered accountant - would be valued at a multiple in excess of 10 times salary

so who is lending at anything like that level? No -one today

so what has to happen? the price will fall

property shortage? this is a myth - when my father was a boy property prices were one times salary - a couple of decades before several generations lived in the same house. Even a slight return to that (for economic reasons) will have a dramatic impact on the market.

Today I walked around several agents - in one there are two very eager sellers offering 'no chain'? I asked what that meant? - they are moving in with relatives!

I asked why the agents window did not show a price reduction - the agent said the sellers are ready to reduce prices further (existing price reductions had not been obviously posted - as the agents wish to demonstrate prices in the area are stable!) I wonder how long that fix will last? and how many mugs they will con before it all falls apart.

I sold last October - and will provbably buy in 2009 - or in an auction late 2008.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in