Arthur takes a look at the latest inflation figures and what they mean for the property market.
When data surrounding inflation was released in mid-August for the British economy, many were shocked. It had been expected that inflation would rise to 2.7%, however, this did not occur. Instead, it remained steady at 2.6% in July. The measure of inflation in question is the CPI, or consumer price index – which if you’re unaware measures inflation based on changing prices in a specifically chosen ‘shopping basket’.
With inflation holding steady, there are two observations that can be noted on the housing market; there is a higher chance that interest rates will hold steady at 0.25%, the lowest they have ever been. This is because governments frequently use monetary policy as a means of controlling inflation. They will, in theory, now no longer need to increase the interest rate to keep it within the target inflation rate. This low interest rate will continue to encourage prospective buyers to purchase property, and mortgages will continue to be cheaper than ever.
The second observation to be wary of is house prices. With inflation holding steady, it shows that there has not been a drastic change in the cost of property. This is encouraging for prospective buyers, who will perhaps now think that their bad luck has ended. Perhaps, this change in prices will signal the beginning of the end of the housing crisis. Moreover, existing home owners will be encouraged by the fact that their property prices have not decreased.
For more updates regarding the British economy, and its impact on the property market, keep an eye on our blog.