The New Year has begun with a series of upbeat forecasts for the next 12 months. Reports from The National Association of Estate Agents (NAEA), HBOS, The Woolwich and the Bank of England all refute the spate of gloomy speculations of late last year.
Appearing recently on the BBC’s Today programme, Eddie George, governor of the Bank of England, gave an positive assessment of the year ahead for the economy. He predicted a ‘gradual moderation’ of house price growth and high street spending. Speaking specifically on house prices and speculation of a crash, he said: ‘You have got to keep things in perspective. I don’t think there is a general expectation that there will be a crash.’
The NAEA agrees and has pointed out demand for housing remains high and stock levels remain low and, while predicting lower house price inflation, it believes predictions of falls across the board ‘are irresponsible.’ Hugh Dunsmore-Hardy, chief executive of the NAEA, said: ‘We can predict lower house price inflation and in some areas measured falls due to regional influences, but it cannot be constructive to cause widespread concern among potential buyers.’
Responding to suggestions that a cut in interest rates would be a boost to the economy George said: ‘On the basis that we are anticipating, the UK economy will grow close to trend and inflation will remain close to target. Neither are something which requires a sharp change in interest rates in either direction.’
The Woolwich is predicting a rise in base rates of 0.75% in the coming year, with house price inflation reducing to around 4% by early 2004. The lender expects total gross lending to continue to rise to £225bn in 2003, from an estimated £216bn for 2002.
Commenting, Andy Gray, head of mortgages for The Woolwich, said: ‘We believe that the house purchase market will slow gradually, while more existing homeowners will seek to remortgage to reduce outgoings as weaker earnings growth, lower bonus payments, higher household taxes and interest rate rises work through.’
Projections from HBOS are broadly in line with those of The Woolwich but, if anything are more upbeat ‘ it predicts 9% house price inflation in the coming 12 months with the national average being dragged down by between 2% and 5% in the Southern regions.
On base rates, Martin Ellis, chief economist at HBOS, said: ‘Base rates are predicted to increase to 4.5% by the end of next year as the UK economy gathers momentum, causing the Monetary Policy Committee to nudge interest rates higher to control any potential build up in inflationary figures.’ Again the lender expects lending to increase in 2003, on the back of remortgaging, bringing expected gross lending to £235bn.