Speculation that we will see deep interest rates is overdone. In the context of the widely anticipated rate cut in August, it is not surprising that the Halifax figures rose. Mortgage approvals suggest we should soon get better news on house-price inflation.
With growth back to trend, housing market indicators trending higher and consumer spending substantially improved from the mid-2005 weak spot we continue to believe the next move in rates is up not down.
Growth has come back and there's still some further improvement left in the pipeline. I think the sentiment on the rate-setting committee is also evolving. With the data continuing to improve we could see a 9-0 vote fairly soon.
Mortgage approvals highlight a significant probability that we will see double-digit house price inflation this year. The MPC would do well to learn from last year's mistakes and react sooner rather than later.