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Bank of England could reignite mortgage boom

Date: Wed, 03 May 04 Analysis

The cooling housing market may be reignited if a fall in mortgage rates gives property prices a second wind, industry experts are predicting.

The Bank of England has made strong efforts to cool the market by raising borrowing costs five times in the past 12 months and this seemed to have paid off as prices tumbled.

But analysts say that despite mounting evidence that the once-booming housing market has turned, lower mortgage costs combined with a resilient jobs market have raised the risk that people might be underestimating the momentum of the market, Reuters reports.

"Britons are price sensitive and you certainly see that in the retail sales data. I think the same applies to mortgages. If you offer people cheap mortgages, they'll take it," said HSBC economist John Butler.

"There is a risk that this might lead to reacceleration in the housing market. In the past couple of years, the housing market probably had about six boosts.

"Whenever people expected it to be slowing, it bounced back," he said.

At 12:00 GMT tomorrow the Bank of England will announce its decision on whether to increase, decrease or hold the basic rate of borrowing for November.

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