Strong Property Market Freezes Interest Rates

Strong Property Market Freezes Interest Rates

As has been widely anticipated in the last few days, the Bank of England has decided to keep interest rates at 4.5 per cent, with the strength of the property market a key reason behind the decision.

After the interest rate cut in August 2005, the property market almost immediately showed signs of recovery and confidence has been steadily rising ever since.

While first time buyers had previously been reluctant to commit to any property purchases, Yorkshire Bank found this week that they are now willing to overpay to ensure they secure a place on the property ladder.

It seems that while those in the property investment business will be generally satisfied with the decision to freeze rates, manufacturers will be less pleased. Recent figures from the British Retail Consortium (BRC) indicated that like for like sales on the High Street had climbed only 0.2 per cent in January, which represents the slowest start to a new year that retailers have seen for more than a decade.

It is in fact the remarkable resilience of the property market that has given the Monetary Policy Committee (MPC) the biggest headache in making this decision, as none of the members had been expecting the recent recovery in the housing market to be so pronounced.

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