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Interest rates hold could undermine UK mortgage demand

Date: Tue, 11 Apr 2006

It is expected that the Bank of England could put interest rates on hold this month because of ongoing concerns about the UK mortgage and housing market.

Howard Archer, chief UK economist at analyst Global Insight, believes that it is likely that an interest rate cut will not be forthcoming in April despite continued price growth – albeit at a slower rate.

The latest figures from the Office of the Deputy Prime Minister (ODPM) figures suggested that annual house price inflation slowed down between January and February 2006. The ODPM data revealed that house price inflation slowed in February to 3.6 per cent compared to 4.3 per cent in the previous month.

"We remain dubious that house prices will be able to sustain sharp gains for an extended period, despite the support provided by still relatively high employment and low interest rates," said Mr Archer.

He added: "For now at least, the Bank of England will be wary that a trimming of interest rates could excessively stimulate the housing market and risk sending housing prices markedly higher."

Market analysts are predicting that interest rates could stay at their current rates until August as UK mortgage and housing remains strong throughout the summer.


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