News Review


Recession “walk in the park” compared to inflation threat By Sarah Davidson


experts fear that interest rates may have to rise to 8% to control inflation spiralling up to 10% in the next few years. andrew Lilico, chief


economist at think tank the Policy exchange, has predicted that economic recovery will become more entrenched in late 2011 and early 2012, boosting the money supply and causing inflation to spike at levels not seen since the early 1990s. and Lilico said that this


scenario was the least bad he envisaged. “all of this is the optimistic case – what happens if the


government gets policy right and its policies work,” he said. in august Bank of england


monetary Policy committee member andrew Sentance voted for the third consecutive month to raise the base rate to temper inflation risk, but he was again the lone hawk and the mPc voted to keep the rate on hold at its historically low 0.5%. despite this Bank governor mervyn King has admitted that inflation is likely to stay above the 2% target at least until the end of next year. another bear voicing


concerns about the future state of the economy in


august was egon von greyerz, the founder and managing partner of matterhorn asset management. He believes that the world


economy is set to go into “an accelerated and precipitous decline which will make the 2007 to early 2009 downturn seem like a walk in the park”. Von greyerz’s main gripe


is with the amount of debt the government is racking up as well as the central bank’s continuing programme of quantitative easing. the Bank of england


has been printing money through its programme of


House price data review launched By Sarah Davidson


a review of official house price indices is being con- ducted by the national Stat- istician office after concerns were voiced about whether having multiple sources of housing statistics is confus- ing for consumers. currently there are seven major indices all of which produce differing statistics for average house prices. the various indices include


two official sets of statistics from the department of com- munities and Local govern- ment and the Land registry. other privately put together indices include numbers from the nationwide, Halifax, rightmove, acadametrics and Hometrack. “the general public put


great store by indices but they often do more harm than good,” said melanie Bien, a


director of broker Private Fi- nance. “Panic can be generat- ed by a single monthly fall in prices, even though another index may record a rise at the same time.” the review will not seek


to consolidate all indices but Jason Bradbury, who is head- ing the review at the national Statistician office, said he was looking to understand what users of the two official sets of statistics wanted from the numbers. “We are aiming to look at


the Land registry numbers and the dcLg numbers in the broader context of what else is out there,” he said. “We certainly don’t have a man- date to review everyone else’s statistics, but we do think there may be some room for improving how the official numbers are produced. “the first stage of the re- view is to find out what peo-


4 mortgage introducer SEPTMEBER 2010


ple using the stats want from them, how they use the num- bers and how easy it is to ac- cess the information they’re looking for. i also don’t think we can assume that we’ll con- flate the two indices – they show different things and i think people are interested in different elements of the house price cycle.” each of the seven indices


looks at the housing market in a slightly different way, with rightmove for example looking at asking prices when the seller instructs an estate agent. the Land registry on the other hand looks at re- peat sales and the prices paid for homes by the purchas- ers, which may be 10 to 20% lower than asking prices.the data sets also vary across the market with some base infor- mation coming from estate agents, some from mortgage advances and others through


automated valuation models. Some indices apply to the uK while others apply to just england and Wales. and some are seasonally adjusted while others do not take into account the number of work- ing days that fall into a month, which can have a bearing on volumes, skewing the num- bers some months. a statement issued by na-


tionwide said: “While the various indices available can produce different monthly movements, over time they do follow very similar patterns. “it is our understanding that the review being carried out by the uK Statistics author- ity is not a criticism of the diversity of indices in the market, but simply an effort to aid the understanding of how different measures of house prices differ and how the official indices can be improved.”


asset purchases financed by the issuance of central bank reserves since the 5th march 2009. Von greyerz added that


with every dollar, pound or euro printed through the process of quantitative easing, the downside risk to the economy was multiplied and accused governments of “robbing the citizens of their money and their work” by printing money. official figures from the


office for national Statistics confirmed that the uK economy registered positive growth of around 1.1% in the second quarter.


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