No, house prices are not falling

It's just a summer blip.

Time to don youy hard hats, cancel this winters ski trip and think twice about the kids school fees, house prices have dropped by 1.8 per cent compared to July. The time for panic though may be a little premature however: what the newly released figures from Rightmove, a property website, have shown is no more than the annual summer blip. In fact since January house prices have continued to rise by 5.5 per cent, the fastest rate since 2006 and that’s £20,000 on January’s average house price of £230,000.

But is a rise in house prices really something to be happy about? Even if we dismiss the much publicised concerns over first time buyers (hard to do I know) the rise in prices may have greater worries for us all. One of the areas for concern is the ability to deal with inflation, as almost any rise in house price will mean higher levels of debt among households.

Even at just 2.8 per cent inflation is outstripping wage rises by 1.1 per cent month on month according to the office of national statistics. That’s a real terms wage cut of 1.1 per cent per month for everyone compared to the price of things like food. Conventional logic dictates that the Bank of England (BoE) cuts inflation back by raising interest rates when that happens, poverty not being a popular condition in a democracy.

But the Bank of England is doing the opposite. They hope that by keeping the lending rate at 0.5 per cent banks will lend more, and in turn we will spend more, boosting the economy. But after four years the BoE has not changed its policy despite banks stubbornly refusing to lend ro all but the safest bets. So maybe there’s another reason to keep rates low?

Maybe the answer lies in the fears of a collapsing housing bubble, a housing bubble so huge it can’t be inflated away.

Mortgage default levels have remained low despite rising unemployment and lower wages. This has been because the main affect of the crisis was that the BoE cut rates to record lows of just 0.5 per cent.  This helped the overleveraged homeowner from defaulting when living costs rose but their wages didn’t. The new rates gave them a cushion on which to land softly.

Any rise in the BoE rate though will pull away that cushion and the bump will be a hard one. Politically a hard bump is unacceptable. Voters could suddenly be homeless or struggling to pay debts. Any government in power when this happens can effectively say goodbye to any chance of a return to power, no matter how independent the BoE is supposed to be.

Therefore the pressure on the BoE to keep rates low and let house prices climb must be huge, if unspoken. The problem is that it’s a short sighted policy. Even if the average homeowner is not likely to default today or tomorrow because they can afford the low repayments, those repayments will inevitably be squeezed by other rapidly rising costs of living. Sooner or later there may not be enough money in the house-holders pockets to pay for all their outgoings including their mortgage. And by holding rates low, the BoE has no room for manoeuvre. Raise rates and be seen to cause a property crash, or keep rates low, increase our daily costs and cause a crash anyway.

They are caught between the devil and the deep blue sea.

So maybe it is time to don our hard hats and cancel that holiday. Not because house prices are falling, but because they’re not.

Photograph: Getty Images

Mike Cobb is a reporter at Private Banker International

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Commons Confidential: Dave's picnic with Dacre

Revenge is a dish best served cold from a wicker hamper.

Sulking David Cameron can’t forgive the Daily Mail editor, Paul Dacre, for his role in his downfall. The unrelenting hostility of the self-appointed voice of Middle England to the Remain cause felt pivotal to the defeat. So, what a glorious coincidence it was that they found themselves picnicking a couple of motors apart before England beat Scotland at Twickenham. My snout recalled Cameron studiously peering in the opposite direction. On Dacre’s face was the smile of an assassin. Revenge is a dish best served cold from a wicker hamper.

The good news is that since Jeremy Corbyn let Theresa May off the Budget hook at Prime Minister’s Questions, most of his MPs no longer hate him. The bad news is that many now openly express their pity. It is whispered that Corbyn’s office made it clear that he didn’t wish to sit next to Tony Blair at the unveiling of the Iraq and Afghanistan war memorial in London. His desire for distance was probably reciprocated, as Comrade Corbyn wanted Brigadier Blair to be charged with war crimes. Fighting old battles is easier than beating the Tories.

Brexit is a ticket to travel. The Independent Parliamentary Standards Authority is lifting its three-trip cap on funded journeys to Europe for MPs. The idea of paying for as many cross-Channel visits as a politician can enjoy reminds me of Denis MacShane. Under the old limits, he ended up in the clink for fiddling accounts to fund his Continental missionary work. If the new rule was applied retrospectively, perhaps the former Labour minister should be entitled to get his seat back and compensation?

The word in Ukip is that Paul Nuttall, OBE VC KG – the ridiculed former Premier League professional footballer and England 1966 World Cup winner – has cold feet after his Stoke mauling about standing in a by-election in Leigh (assuming that Andy Burnham is elected mayor of Greater Manchester in May). The electorate already knows his Walter Mitty act too well.

A senior Labour MP, who demanded anonymity, revealed that she had received a letter after Leicester’s Keith Vaz paid men to entertain him. Vaz had posed as Jim the washing machine man. Why, asked the complainant, wasn’t this second job listed in the register of members’ interests? She’s avoiding writing a reply.

Years ago, this column unearthed and ridiculed the early journalism of George Osborne, who must be the least qualified newspaper editor in history. The cabinet lackey Ben “Selwyn” Gummer’s feeble intervention in the Osborne debate has put him on our radar. We are now watching him and will be reporting back. My snouts are already unearthing interesting information.

Kevin Maguire is the associate editor (politics) of the Daily Mirror

Kevin Maguire is Associate Editor (Politics) on the Daily Mirror and author of our Commons Confidential column on the high politics and low life in Westminster. An award-winning journalist, he is in frequent demand on television and radio and co-authored a book on great parliamentary scandals. He was formerly Chief Reporter on the Guardian and Labour Correspondent on the Daily Telegraph.

This article first appeared in the 23 March 2017 issue of the New Statesman, Trump's permanent revolution