The Bank of England has boosted UK interest rates three times since November. Housing markets just don't care.
Britain's largest building society said the average house price rose by 1.9 per cent this month to �149,020. This put the annual rate of house price inflation at 19.5 per cent, accelerating from April's 18.9 per cent to the fastest rate in a year.Just last month the IMF warned yet again of the likelihood of popping housing bubbles in much of the Anglosphere (UK, Australia, Ireland, US) along with a few other countries (Netherlands, Spain). In the UK, rising real interest rates haven't put off homebuyers, and the gap between British annual real housing price growth (10.4%) and annual real disposable income growth (3.16%) is the largest of the 11 countries studies by the IMF.
But Nationwide warned that the longer the house price surge goes on, the more serious the result of a downturn was likely to be.
Lenders and the Bank of England alike have been predicting house price inflation would slow dramatically after last year's 25 per cent gains but this has so far failed to materialise.
"The likelihood of a potentially drawn out period of house price inflation is rising," said Alex Bannister, Nationwide's group economist.
The ever-swelling housing bubble in the UK suggests that a gradualist interest rate hike approach to tackling inflation may not be the best approach -- a lesson that Alan Greenspan and Co. might want to consider as they continue putting off raising interest rates in the US, now perhaps as late as August.