Belfast Telegraph

Friday 22 August 2014

The economy

THE economy continues to be a game of snakes and ladders, with consumers spending a bit more while expecting the value of their homes to fall.

There was some good news with the historically low interest rates pegged at 0.5% for another few weeks at least.

Industry experts, however, have claimed that, even if interest rates do go up, it will be by the smallest of margins.

And some property insiders have further claimed the rock-bottom interest rates will help house prices nudge up in the wider UK market.

The latest findings from the Nationwide Consumer Confidence Index show a rise to 66 points in March - up 13 points from February's record low. This is the first hike since the introduction of 20% VAT and economists believe consumers have adjusted their spending accordingly.

Robert Gardner, Nationwide's chief economist, said: "After a fairly dismal start to the year, there was some respite in March with consumer confidence picking up from the record lows seen in February.

"While this is a welcome change in direction, we must remember that the index remains at a historically low level and the uptake in March failed to reverse the fall suffered in the previous month.

"With the recovery still proving sluggish, it is unlikely we will see a significant improvement in coming months."

Mr Gardner pointed out that energy prices and interest-rate expectations will play a key role in shaping confidence over coming months.

And with household budgets still hard-pressed, remortgaging outstripped mortgage lending for the first quarter of this year, according to the Council of Mortgage Lenders.

The latest figures from the CML showed remortgaging accounted for 37% of lending during the first part of 2011, while 24% of lending was for loans to buy new property.

And while lending is up on last year, borrowing to buy a house is down 16% in value. The CML has claimed the hike in remortgage activity could be linked to an expected interest rate rise.

Michael Coogan, CML director general, said: "We saw a significant increase in both house purchase and remortgage lending in March, but over the first quarter of the year as a whole, the picture was subdued and that is unlike to change."

Meanwhile, Rightmove House Price Index has claimed fewer new houses coming onto the market and low interest rates are helping push up asking prices for fresh-to-the-market property by 1.3%.

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