The Bank of England's Monetary Policy Committee (MPC) has once again voted to maintain interest rates at 4.5%, marking the third consecutive month that interest rates have remained frozen.
The move was widely expected amid weakening consumer confidence levels reported yesterday by Nationwide Building Society.
The Lender’s Consumer Confidence Index fell by 2 points in October to 92, which it says is a new low, while the main index has fallen by 16% over the last 6 months.
Nationwide says the fall in October was driven by fading confidence in the economy and the labour market.
The index has now fallen for three consecutive months and by 17 points since April. The longer term trend is also down, with the 3-month average falling from 98.3 to 95.3, indicating a significant weakening in consumer sentiment.
Stuart Bernau, Nationwide’s executive director, says: "After three consecutive months of falls, consumers continue to be gloomy. The main index reached another new low in October, with consumers’ confidence in current conditions particularly badly hit.”
But he says recent positive news about both the number of housing transactions and house price inflation, as well as retail sales, all give indications that better times may lie ahead.
While consumer confidence in the future remained unchanged from last month’s low of 91, confidence in current conditions fell by 5 points to a new low of 93, adds Nationwide.
Meanwhile October’s numbers suggest there are signs consumer confidence in the housing market is returning. 41% of people think house prices will rise over the next six months, the highest proportion since August 2004, when the annual rate of house price inflation stood at 18.9% meaning the Nationwide’s Consumer House Price Forecast has risen to 2.9%, from 2.1% last month.
The lender says it is likely that recent positive news has boosted confidence in the housing market. The number of mortgage approvals has been creeping up all year and reached 107,000 in September, the highest figure for over a year.
But David Bexon, managing director of SmartNewHomes.com, warns that although there are signs that the housing market is beginning to recover from its year-long slump, it is too early to call whether there will be a full recovery.Her says The Bank of England has missed the chance to provide an early lift to the housing market saying: "Such a move would have provided the housing market with a positive end to what has been a difficult year and encouraged consumer spending in a crucial couple of months for the high street. Without this, there is likely to be a bigger than usual dip in activity and prices over the festive period as homebuyers remain cautious of an uncertain market."
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