At a speech at Bloomberg London, MPC member Stephen Nickell admitted that he found the housing market difficult to predict, with the available data sending out mixed messages.
He says: “The analysis indicates that there is a significant probability that house prices will fall at some stage, though we cannot of course know by how much. Equally, it is also quite possible that house prices will not fall at all. This is simply a reflection of the uncertainty noted above.
“The evidence suggests that house price inflation is significantly related to household consumption growth and hence to aggregate demand growth and future consumer price inflation in the economy.
“As a consequence, prospects for house price inflation will play a significant direct role in monetary policy aimed at general inflation in the economy despite the fact that house prices are not included in the consumer price Index.
“By contrast, the fact that household debt accumulation appears not to be closely related to household consumption growth indicates that it will not have a direct impact on monetary policy. However, it may have some small indirect impact if, for example, high levels of debt make the response of the economy to interest rate changes more uncertain.”