Halifax Bank, now part of Lloyds Banking Group, used to publish its monthly house price data in the first couple of days of the subsequent month, but two years ago, when house prices had started falling, they decided to postpone the release until the early morning of the day on which the Bank of England's Monetary Policy Committee finalised its decision on interest rates (usually the first Thursday in the month).
The logic was, in case the MPC were wavering, that 'bad' news on house prices would stampede the MPC into cutting rates and/or keeping them low. This tactic seems to have worked, and once house prices went into the dead cat bounce, the Halifax reverted to releasing the figures a few days earlier.
House prices had sort of flattened off over the past few months, but you could have guessed that Halifax' September house price statistics would be 'bad' because they delayed them until today, the day on which the MPC solemnly announced that it would keep the base rate (a largely meaningless figure) at 0.5%.
BTW, that 3.6% monthly fall (while probably wildly overstated) brings back the average house price, not adjusted for inflation, to the same level as September 2004, i.e. six years ago (from tab 11 of their Excel sheet).
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3 comments:
My mate still hasn't taken the plunge, I think it's starting to sink in.
I got to work today and he'd emailed this story to me!
Is it reasonable (I run all my crazy economic ideas past you now) to suggest that the base rate should be fixed, and the MPC simply be fired. Even better: fix it at 0% and be done.
It's my observation that when interest rates were higher (let's say 5%), then you could get a variable rate of base + 0.5; now interest rates are low, you cannot get base + 0.5. You can get base + 5%. (I'm using round figures, because I can't be bothered to look them up to three s.f.).
To me that implies that the banks are lending at exactly the same interest rates they always were. The bank of England base rate is meaningless (as you point out). The savers seem to have gotten a rougher deal.
If it were forced to be fixed at 0% though, the market could confidently find its own rates (without fear of the MPC screwing them over) for borrowers and lenders, and savers (who are currently screwed) might have a chance at getting a decent return again.
SL, excellent, that's one more of Us and one fewer of Them.
OP, in practice, the base rate is the interest rate that BoE pays comm banks on their deposits with BoE (the rate at which BoE lend to comm banks is about 1% higher) and has little further relevance (as you describe). In L's banking and FS manifesto, he made it clear we were going to shut down the MPC anyway.
As a separate issue, our government is a huge net borrower, so the Debt Mgt Office will have to run things in such a manner as to minimise the interest cost to the taxpayer - if they can get away with paying 0.5% on borrowings/deposits from comm banks, then good luck to them.
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