Howard Archer Market Quotations

Overall, the mortgage approvals and lending data indicate that the more robust housing market activity evident in the second half of 2005 has continued into 2006.

While the February mortgage lending and approval data are relatively healthy, there are hints that housing market activity could be starting to lose momentum after several months of improvement.

Activity is benefiting from August's interest rate cut, increasing confidence in the housing market and still rising employment. This is likely to put a floor under house prices.

This increased housing market activity has clearly led to some recent firming in house prices, and there is undeniably a risk that prices could move sharply higher over the coming months.

Healthy mortgage lending data show that housing market activity extended its recent firmer performance in December. This is also borne out by the latest survey evidence consistently showing increased buyer interest.

For now at least, the Bank of England will be very wary that a trimming of interest rates could excessively stimulate the housing market and risk sending house prices markedly higher. It certainly further rules out a move today.

This is likely to reinforce the central bank's concern that any further trimming of interest rates could excessively stimulate the housing market and risk send housing prices markedly higher.

The climb in annual house price inflation to 2.5 per cent in November from a nine-year low of 1.8 per cent in October reported by the ODPM adds to the recent evidence that house prices have firmed to a limited degree recently amid stronger housing market activity and increased buyer interest.

The latest data - including the improvement in manufacturing activity and current strength of the housing market - has increased the odds that the eventual next move in interest rates will be up.