Speaking at Mortgage Business Expo, Martin Ellis, head of group economics at HBOS, and Laurence Sanders, economist at Bank of Ireland proclaimed a bright outlook going forward.
However both agreed there would be a slowdown in the current GDP of 3.3 per cent to something closer to 2.25 per cent in 2008.
They said this was not symptomatic of a wider problem. Rather, they said a little of the heat would come out of current growth rates, while strong employment and low inflation figures would underpin performance.
The biggest threat to the housing market will come from consumer sentiment and so long as this holds up and current problems in the financial markets do not undermine confidence, Ellis and Sanders said issues of supply would continue to hold up property values.
Indeed Ellis claimed that the Government’s bid to build three million new homes over the next 20 years would be 500,000 short of what was actually required.
Both expected a cut in the Bank of England base rate and suggested it was most likely to come in February 2008. Despite this Ellis warned that a number of borrowers would face problems in the coming months as the 2.8 million fixed rates put in place over the last two years came to an end.
Ellis said: “Average borrowers are facing a rise of 16 per cent or £100 a month as they come off fixed rates.”
