Howard Archer Believe Quotations

We believe house price increases will be relatively muted over the coming months, given affordability constraints, increased debt levels and muted earnings growth.

We still believe UK interest rates will eventually be trimmed by a further 25 basis points, although not until August at the earliest.

While we believe that it is premature to rule out another 25-basis-point cut before the end of this year, we acknowledge that the odds are increasing that it will be delayed until early 2006.

While the fourth quarter GDP data and the relatively healthy mix of the components further diminishes the chances of a near-term trimming of interest rates, we still believe a 25 basis point interest rate cut is very possible in May.

We believe the door is opening for an interest rate cut early in 2006 if the economy fails to show sustained significant signs of improvement over the next couple of months.

The earnings data may encourage the Bank of England to hold off from cutting interest rates in the immediate future as March while it seeks sustained clear evidence that the pay settlements for 2006 are remaining contained (the early signs are that wage moderation is continuing). However, we believe that interest rates are likely to be trimmed by a further 25 basis points by May.

We believe that interest rates will eventually come down by a further 25 basis points to 4.25%.

This is likely to put a floor under house prices, but we remain highly doubtful that house prices will move substantially higher on a sustained basis any time soon. If house prices start to accelerate markedly, we believe buyer interest will soon diminish, thereby keeping a lid on prices.

If house prices start to accelerate markedly, we believe buyer interest will diminish, thereby keeping a lid on prices.