Government Criticised Over Hips

The National Audit Office have criticised the Government's handling of the Home Information Packs Scheme (Hips). A report has revealed that consultants who were hired to assist with the scheme had a financial interest in a recommended firm.

Home Information Packs were introduced in England and Wales on 1 August and are currently said to be costing between £400 and £700 each to produce.

The scheme is currently limited to those selling a property with a minimum of 4 bedrooms, though its expected that the scheme will be rolled out in full shortly.

Interest Rate Decision

The Bank of England's Monetary Policy Committee have announced this lunchtime that UK interest rates will remain unchanged at 5.75%.

Watching a discussion on Bloomberg regarding the interest rate decision, it was interesting to see a representative of the Bank of Scotland suggesting that he thinks that there may be one more interest rate rise (to 6%) in the near future and that rates will then peak.

It's evident that the Bank of England are still concerned about inflationary pressure, particularly from rising oil and food prices. They've obviously taken the decision that another rate increase is not necessary right now though.

Contrasting news

Do you sometimes wonder how reliable data on the UK housing market really is? This morning provides a good example. While we're waiting for the latest meeting of the Bank of England's MPC, I thought it might be an idea to look at what the newspapers are reporting.

I was hoping to get an idea of the likely decision from the MPC later. Unfortunately, it really seems like a muddle of news on house prices today.

Results from the Halifax today suggest that the housing market is still growing, albeit at a slower rate. They reckon that house prices rose by 0.7% in July. Some of us will recall that the Nationwide released their figures for July last week and suggested that house prices had risen by 0.1% in July. Who do we believe? Or are both simply unreliable?

The Halifax figures indicate that house prices have risen by more than 11% in the last year, with the average home now valued at £198,915.

Channel 4 News are reporting these figures under the headline of "housing market slowdown continues". They point out that both Nationwide and Hometrack suggest that prices rose by 0.1% last month.

This Is Money suggest that July saw a surprise £1,500 rise in house prices. A slightly more positive slant on the news.

So, what are we to make of it all? My analysis of the current situation is that UK house prices are still growing but at a very slow level. House price inflation has certainly slowed, undoubtedly as a result of the recent interest rate rises. Many people are wondering whether rates will continue to rise.

My best guess is that the Bank will take quite a conservative stance later today and decide to keep interest rates at the same level. The reason that I think they'll go down that route is because they won't want to push the housing market too far at this point, risking starting a crash.

It's also worth remembering that the small rise in national house prices last month will hide regional variations. Some parts of the country will have seen fairly substantial falls, while its likely that London, Northern Ireland and parts of South-East England will have seen prices rising considerably more quickly than the headline rates suggested by mortgage lenders.

Bank of England meet tomorrow

The Bank of England is set to make a further decision on UK interest rates. News from tomorrow's meeting is eagerly anticipated by home-owners and others with an interest in the UK housing market.

Signals from the City suggest that the general feeling is that the Bank will leave interest rates unchanged, as they look for signs that past interest rate increases may already be having an impact.

We'll keep an eye out for what they decide and I'll bring you more analysis of the situation tomorrow.

Don't forget that the main Finance Facts website carries property news too.

Housing News Round-up

I thought I'd take a look at what the newspapers and online media are saying about the housing market - here's a current cross-section of articles that should hopefully provide you all with some interesting reading material:

Standard Life are widely reported as suggesting that there may be a slowdown ahead for the commercial property market.

This Is London carry a report suggesting that UK property prices are currently over-valued by 20%.

The BBC carry similarly negative news with suggestions for house-builders Taylor Wimpey that the housing market is "subdued", although the builder does suggest that trading conditions remain stable.

The Telegraph look at house prices from a rather different angle, noting that the recent interest rate rises seem to have had little effect on the housing market.

Looking at news specific to one region, The News Shopper, which covers the London area, reports that house prices have risen by up to 30% in the last year alone in some areas of the capital.

A report from Reuters suggests that inflation is moderating and that consumers are generally upbeat. Interesting news with the Bank of England meeting tomorrow to take another decision on interest rates.

Nationwide: house prices stagnate

Today saw the release of Nationwide's figures for July on UK house prices. According to the leading mortgage lender, house price growth appears to have come to a halt, with prices rising by just 0.1% in the month as a whole.

The results mean that the annual rate of growth dips to 9.9%.

In other news, the British Bankers' Association report that mortgage approvals have also fallen significantly - down by 11% on a year-on-year basis.

Bradford & Bingley, a lender who are heavily involved with the buy-to-let market, seem to give a differing opinion on the state of the market. They suggest that the buy-to-let market was very strong in the first six months of the year (January to June) and that they expect the second half of 2007 to see similarly strong sentiment among buy-to-let investors.

As ever, it seems that we get different signals depending upon who we listen to.

To see whether the reduced rate of house price growth is significant, it's interesting to compare how the market has performed in July during previous years. The table below gives the figures for monthly growth in July for the past 15 years:

1992: -0.4%
1993: -1.2%
1994: +0.9%
1995: +0.3%
1996: +0.3%
1997: +1.6%
1998: +1.3%
1999: +0.8%
2000: -0.2%
2001: +1.3%
2002: +2.2%
2003: +0.9%
2004: +1.9%
2005: +0.3%
2006: +1.1%
2007: +0.1%

Interesting times ahead it seems.

Northern Rock predict house price slowdown

Northern Rock, the UK mortgage lender, have suggested that house price inflation will slow quite suddenly by the end of 2007.

Although house price inflation is currently running at about 10%, the lender suggests that this level is likely to fall quite dramatically - by the end of the year, it may be that house price inflation drops to nearer 4%.

This is an interesting statement, as we are already seeing that the headline rate of house price inflation (HPI) hides regional differences. For instance, both Northern Ireland and Greater London are performing at well above the headline rate of growth.

In order for the overall rate of HPI to fall to 4% by the end of December, it would surely involve some relatively large decreases in house prices in some areas (particularly when you take into account the current rate of inflation).

Rising interest rates are undoubtedly already hitting affordability in some areas and it will be interesting to see how the Bank of England react to news that house price growth is showing clear signs of slowing. Will they feel the need to keep increasing interest rates, or do these indicators suggest that interest rates are about to peak?