UK House Prices - Real and Nominal

This graph shows the changes in nominal and real house prices in the past two decades.
Real house prices means adjusted for inflation.
In the last housing crash from 1989-1993, inflation was significantly higher than the present period. Therefore, the fall in real house prices was quite dramatic. e.g if House prices fall 15% in a year [...]

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[Source: Finance Blog]

When Will Interest Rates Rise?

With UK interest rates at record lows, many are wondering how long they will remain close to zero?
If the experience of Japan is anything to go by, very low interest rates could last 10 years. However, I think it is unlikely that the UK will repeat the Japanese experience of a decade of deflation and [...]

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[Source: Finance Blog]

Why US House Prices are Falling

After the well documented housing bubble from 2000 - 2006, US house prices have shown a remorseless and long lasting decline.
Since the market turned in 2006, house prices are expected to fall by 41% by 2010. Some fear US house prices could fall by 48%. The interesting thing is that US house price to rentable [...]

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[Source: Finance Blog]

Pound Sterling Set to Rise Against the Euro?

The Pound has had a rough time against the Euro, in recent months. But, whilst the UK economic climate is far from strong, the Eurozone economy looks to be experiencing increasing problems.
Led by the German economy, the Eurozone experienced a sharp contraction in the first quarter of this year. Eurozone GDP fell by 2.5% and [...]

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[Source: Finance Blog]

A Good Time To Buy? - As House prices stabilise.

A study by hometrack showed that last month, house prices were stable in most regions, giving more evidence that the dramatic declines in house prices may be over. However, hometrack cautioned against calling the bottom to be reached. Last week a report by Nationwide predicted house prices would not maintain a lasting recovery until next [...]

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[Source: Finance Blog]

Changes in UK Banking System

The past two years have seen an acceleration in the shifting market structure of the UK Banking system.
For the consumer it represents bad news. The market has become more concentrated leaving less choice. In particular the UK Bank market is becoming dominated by the Big Two Banks - Lloyds Group and Santander.
These are the Top [...]

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[Source: Finance Blog]

Valuing the Property Market

Looking back at the past two years it seems that the housing market is subject to irrational expectations helping to exaggerate booms in house prices that later prove unsustainable.
Why do Booms in Housing Markets occur and why don’t People see Them Coming?
The nature of the UK Property Market encourages volatility. With inelastic supply (unresponsive to [...]

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[Source: Finance Blog]

Prospect of 0% Interest Rates

The Bank of England’s inflation report gives a strong indication that interest rates in the UK could fall to 0 - 0.25%. There is also an increasing likelyhood of quantitative easing - a policy of creating money to avoid the deflationary impact. (B of E report)
The UK is facing its deepest recession since the Second [...]

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[Source: Finance Blog]

Interest Rate Predictions

Predictions for Interest rates in the UK. How the MPC is likely to set interest rates in the coming months.

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[Source: Finance Blog]

Real Interest Rates

Graph showing Real Interest Rates
Source: Bank of England, 2005, p. 11, Chart 3 via - open learning
Real interest rates is the official interest rate - inflation.
If interest rates are 1% and inflation is 0.2%. Then the real interest rate is 0.8%
If interest rates are 12% and inflation is 13.5%. Then the real interest rate is [...]

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[Source: Finance Blog]

Historical Interest Rates

Readers Question: How can I find data on Historical interest rates nominal and real

Graph of Interest rates since 1985
source: House web
Real Interest rates
See: Real interest rate history in UK
Other links for Info on Past interest rate trends

The Bank of England provide detailed interest rates since 1963 [B of E link]
e.g. Official interest rates since 1975 [...]

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[Source: Finance Blog]

Surprise Rise in House Prices

Halifax posted a surprise rise in house prices during January.

Figures suggested house prices in January rose 1.9% in January reversing the 1.5% fall in December.
This comes on the back of data showing an increase in mortgage approvals and activity in the housing market.
Combined with record low levels of interest rates, Halifax have [...]

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[Source: Finance Blog]

First Signs of Recovery?

“It was the best of times, it was the worst of times”
There is no doubting that the UK housing market is facing the worst of times with rising repossession, falling house prices and a collapse in property transactions. But, amidst all the doom and gloom, some mortgage owners will have to admit they have never [...]

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[Source: Finance Blog]

Government Policies and House Prices

Readers Question: Do government policies make any difference to house prices?
See: factors that affect house prices

Governments could try to influence house prices, but, they have generally been unsuccessful. Also the MPC set interest rates. The government no longer controls interest rates but interest rates could have an impact on house prices
To moderate house price rises [...]

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[Source: Finance Blog]

Factors that Affect House Prices

Readers Question: I would like to know that what are the factors that effect the price of houses in UK and does government policies make any difference to it?
The most important factors for influencing house prices in the UK
Market sentiment. If people see house prices rising and they expect prices to continue rising, more people [...]

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[Source: Finance Blog]

Why Credit Crunch in the UK?

Readers Question: I still dont understand why the credit crunch in US caused a credit crunch in UK? is it because banks in UK depend on US banks to borrow money?
See: Causes of Credit Crunch
Many UK Banks bought bundles of the bad mortgage debt from US mortgage companies (either directly or indirectly). Therefore, when the [...]

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[Source: Finance Blog]

Time Taken to Sell A House

The credit crunch has significantly increased the time to sell a house. The lack of first time buyers in the market (with no onward house to sell) has slowed up the market considerably.
Even just looking around your local streets shows a real dearth of ’sold signs’. I know on my street in Oxford there are [...]

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[Source: Finance Blog]

Problem With Falling House Prices

House prices continue to fall amidst sluggish property sales. The dynamics of the market mean that falling house prices create a powerful negative momentum for both the economy and housing market.
Lenders don’t want to lend With falling house prices.
When prices are rising, mortgage loans of 95% value make sense. However, when prices are falling they [...]

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[Source: Finance Blog]

Affordability of Housing in UK

An interesting statistic shows that last year’s house price falls have made average house prices more affordable.
At the peak of the boom in July 2008, the house price to earnings ratio reached a record of 5.86. Now, the ratio of house price to earnings has fallen to 4.56 (according to statistics by HBOS). This is [...]

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[Source: Finance Blog]