Low interest rates have really been powering these markets. The ECB is worried it is signaling inflation further down the line, but in the U.K. you have had very strong house-price rises, and no real pickup in general price inflation.
Quotes about house-price (6 Quotes)
We estimate that home equity extraction from the refinancing of prime first mortgage liens will result in an extraction of 243 billion in 2005. However, equity extraction in 2006 will likely fall sharply, by a little more than half to about 117 billion, as we expect lower refinance activity and slower house-price appreciation.
Speculation that we will see deep interest rates is overdone. In the context of the widely anticipated rate cut in August, it is not surprising that the Halifax figures rose. Mortgage approvals suggest we should soon get better news on house-price inflation.
There is no evidence here of prices topping out. On the contrary, house-price inflation continues to accelerate, as some areas that have experienced relatively slow (price) appreciation are picking up steam.
This pickup in monthly house-price inflation is consistent with the continuing upward trend in market activity in recent months and the previous pattern of house price movements when the Bank of England begins to reduce interest rates.
These products could be cause for some concern both because they expose borrowers to more interest-rate and house-price risk than the standard 30-year, fixed-rate mortgage and because they are seen as vehicles that enable marginally qualified, highly leveraged borrowers to purchase homes at inflated prices,