- January 31, 2023
- Posted by: AliensFaith
- Category: OBJECTIVE PRESS
UK annual house price growth slows to 1.1%; US Federal Reserve expected to raise rates by 25bps to 4.75% but markets wonder whether it will then pause
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, says UK house prices have further to fall.
We still think house prices will not find a floor until they have fallen by about 8% from their peak. Households’ real disposable incomes will fall further over the next couple of quarters, as the government reduces its energy bills support, and as firms push through job cuts in the face of surging borrowing costs.
Meanwhile, mortgage rates are over three times higher than at the start of 2022, despite falling from October’s peaks, and look set to fall only slowly this year, ensuring that mortgage approvals remain near Q4’s rock bottom level. Demand also will be constrained by lenders’ affordability tests, which are based off Bank Rate. Many potential buyers also will wait until prices have fallen substantially.
However, there are some encouraging signs that mortgage rates are normalising, but it is too early to tell whether activity in the housing market has started to recover. The fall in house purchase approvals in December reported by the Bank of England largely reflects the sharp decline in mortgage applications following the mini-Budget.
“It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks.
It is this disconnect between the Fed’s rhetoric and what the market is pricing which makes today’s FOMC rate decision and Powell press conference very much a “live” meeting.
How does Powell square how the Fed sees the path of future rate rises and the markets’ belief that the central bank will start cutting rates again before the year is out.
9am GMT: Eurozone S&P Global Manufacturing PMI final for January (forecast: 48.8)
9.30am GMT: UK S&P Global/CIPS Manufacturing PMI final for January (forecast 46.7)
10am GMT: Eurozone Inflation flash for January (forecast: 9%, previous: 9.2%)
10am GMT: Italy Inflation for January (forecast: 10.1%, previous: 11.6%0
1.15pm GMT: US ADP Employment change for January (forecast: 178,000)
2.45pm GMT: US S&P lobal Manufacturing PMI final for January (previous: 46.2)
3pm GMT: US ISM Manufacturing PMI for January (forecast: 48, previous: 48.4)
7pm GMT: US Federal Reserve interest rate decision (forecast: 25bps rise to 4.75%)
