News Column

Worrying rises in house prices

June 19, 2014

It was disappointing to read your headline ("House price rises best in four years", The Herald, June 18). Surely the past few years should have demonstrated the pernicious effects of such price inflation, which was a major factor underpinning the madness that caused the 2008 financial crash. Very few persons benefit from rises in house prices. For those wishing to move to a larger property, price inflation just means that the gap between the value of their present house and the replacement becomes wider. For first-time buyers, houses just become less affordable.

But more insidiously, the apparent increase in personal wealth represented by price inflation may tempt homeowners into using this as security for raising money by re-mortgaging.

This has two dangerous effects, in that any subsequent interest rate rises may make the repayments unaffordable and lead to repossession, while the apparent increase in economic activity engendered by such borrowing allows Chancellor George Osborne to claim that his vicious economic policies are working.

This claim then allows him to go further in demonising those who need support from the state, and imposing more austerity, pushing more innocent individuals into poverty.

Care must be taken not to be swept up in the wave of false euphoria that accompanies house price increases.

These rises are just another example of price inflation which, for any other item such as fuel, household goods and so on would, very properly, be denigrated.

Dr Dick Morris,

Veslehaug,

Polesburn,

Methlick,

Ellon.

It is important that newspapers do not major on the UK Government's favoured Consumer Prices Index to the exclusion of the long-established Retail Prices Index. The latter includes housing costs and so affects us all.

Your article ("Fall in inflation triggers rates restraint", The Herald, June 18) majored on the worrying increases in house prices, particularly in London, but did not tell us that the RPI is now at 2.4 per cent. This is considerably higher than the CPI, which is now quoted as 1.5 per cent.

R J Ardern,

26A Southside Road,

Inverness.


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Source: Herald, The (Scotland)


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