The recent interest rate rise should be the last for a while. There is a danger that inflation fears may have been flattered by a cursory analysis of the alleged “frothiness” of the housing market and the evident rampant price inflation.

It seems to me that the Monetary Policy Committee which oversees these matters have misread the symptoms of the present headlines.

In the first instance the largest house price increases have occurred in the higher end of the price scale and is largely driven by international demand, certainly in the South East UK but this pattern is by no means reflected in the more ‘normal’ markets outside the “principality” of  London, whose property markets dynamics bear little resemblance to elsewhere in the United Kingdom.

The Bank Of England in its haste to assuage the leery press headlines, should take a much more sanguine and considered view about the state of the housing market. This requires taking care of the mass o ordinary householders with modest incomes and mortgages…who are understandably indebted, not as a luxury but as a matter of necessity.

Driving macro economic management on the rarefied conditions in London is not the way to run interest rate policy. No more rate rises please.

Smithy

Having accrued a 27% stake in in its target the Castle Bidco consortium which has already tabled a bid for Crest Nicholson, has been given an ultimatum to effectively raise its offer for the latter.

In the PR battle of the relative positions, that are emerging from both companies, Crest are claiming that they are expecting a higher than original bid (585p) and Castle Bidco suggest that they are not likely to reconsider their original offer.

Comment: Having built up such a large speculative stake, it would seem that Bidco have somewhat overplayed their tactical hand and are unlikely to walk away without further considering an improved offer. It is also unsurprising that the Crest board are ramping up the pressure on the bidders having tasted their intent.

T Broadbent

House Builders News In Brief:  

In a growing trend of warning about anticipated market conditions, Taylor Woodrow the house builder which is exposed to both the UK and US markets has warned about potential downward trends in both. 

The firms CEO Mr Ian Smith could be forgiven for announcing expectations of what he described as: “…significant reductions in both operating margins and return on capital employed during 2007”.

The firms bible of future sales activity, its forward order book had slumped by 40% to £437m GBP despite its confidence in “….prospects for the business”. Annual pre-tax profits fell 1.3% to £404m GBP. 

Sopwith

After announcing a near 17% increase in annual profits, Northern Rock stated the mortgage lenders key aim is to become the number three mortgage lender in the ultra competitive UK mortgage market.

Its gross annual lending increased last year by 23% to a total of £33 bn GBP and its net share of mortgages to 13.4%.

Smithy

Source

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