In his speech to the Northern Ireland Chamber of Commerce last night the Governor of the Bank of England Mervyn King took the opportunity to respond to critics of the way in which the BoE handled the Northern Rock crisis. He also had this to say about the BoE interest rate:-
“ ..it will not be set now to insulate the banking system from the re-pricing of risk. But you will be sure that we will do whatever is necessary to keep inflation close to the 2% target.”
So there you have it. With signs of inflationary pressures building in the wider economy the Housing Market is unlikely to benefit from a premature easing of interest rates urged upon the Governor by Bankers who have seen big holes blown in their balance sheets. So, it may be prudent for people to plan for interest rates to remain at or about the current level for some time to come. That can only contribute to a further dampening down of House Prices.