Very good news this week on inflation

Very good news this week on inflation – less good news about our very out of touch BoE keeping rates high so the economy can’t recover. 
In one of the papers this weekend, there was an article saying the German housing market has been in freefall now losing 8.4% in 2023 and that there is the potential start of a spiral downwards. The reason for the fall is being put down to high interest/mortgage rates across the Eurozone (4%) and soaring living costs and minimal wage growth. Demand for housing was down 37%.
In the UK, demand for residential mortgages was down 41% in 2023, mortgage/interest rates are over 5% and we have had soaring living costs. But our house prices are up 1.2% to February 2024 (Nationwide)  
So why with similar economic conditions, are the house prices rising in the UK, when house prices in some other countries are falling sharply?
The main answer is sentiment. If you perceive prices are falling, you stop buying, you then believe prices will be cheaper next year. Then others start panic selling, fearing they’ll lose even more money next year.
Experts are still not really sure what caused Black Monday in 1987. The adjustment of MIRAS in 1988 was no reason for the housing market to collapse. Northern Rock’s failure was not enough by itself to trigger a banking and housing crisis in 2007/8; and George Osbourne’s umpteenth increase in stamp duty in 2014 was no reason to trigger a 20% house price collapse in the upper tiers of the market. So why did these events, and many others over history, collapse house prices? Because these were the triggers that turned sentiment, that then stopped the merry-go-round. Once sentiment turns negative, then the downward spiral begins. 
So let’s hope the BoE’s inactivity is not the trigger this time. 
You and I buying too many air fryers has not been the cause of this inflation; so they must drop interest rates hard and quickly and stop giving businesses and people’s money to banks, and let us spend it where the economy needs it most. 

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