Rate decision to keep house price growth stable

09 March 2007
House price growth should continue to slow gradually under the impact of the Bank of England's decision to hold the base rate steady at 5.25 per cent, most markets analysts agree.

The widely-anticipated decision to freeze rates for the time being will come as "a relief to borrowers" who had found house purchase progressively more expensive in the aftermath of three recent quarter-point rate rises, Alliance & Leicester's director of mortgages Stephen Leonard commented.

Moreover, independent mortgage adviser Ray Boulger at John Charcol was upbeat, citing "early signs of a slowdown in the rate of increase in prices".

He advised borrowers to opt for a tracker mortgage, given that many fixed-rate mortgage products have already factored the widely-anticipated further base rate increase later this year into their interest rates.

But Royal Institution of Chartered Surveyors chief economist Milan Khatri was less optimistic, predicting that "rising income and employment levels" will continue to give fresh impetus to house price growth and ensure that "affordability conditions … remain difficult for would-be home buyers".

Mr Khatri pointed to Halifax house price growth figures which this week revealed 1.8 per cent growth in February.

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