"Key advanced economies should pursue a policy mix that supports near-term growth, anchored by credible plans for medium-term public debt sustainability"
- The International Monetary Fund
Even despite solid gains in house prices, they are not expected to return to their pre-crash peak until 2021, as the inflation remains stubbornly high, accountants PricewaterhouseCoopers has warned. The company also said they expect prices to gain 3% to 4% annually over the next four years, and to reach their 2007 high in cash terms already at the end of 2014, the nation's households will have to wait a further seven years to recover the ground lost after factoring in inflation. At the moment, prices are 18% below 2007 levels in real terms, although they are 3% lower in headline levels. However, the company stressed out that the household squeeze would persists for at least one year, as consumer prices are rapidly increasing, moving higher from the BoE's 2%. They also said, inflation should hover around 2.7% in 2013 and 2.4% in 2014.
High inflation level is adding more pressure on new-appointed BoE Governor Mark Carney, providing him less space for additional stimulus policies, like more quantitative easing. Nevertheless, the Funding for Lending Scheme, which was set up by the BoE to offer cheap finance to banks and building societies, has helped to lower banks' borrowing costs and reduce the costs of mortgages, leading to a significant development in the labour market. However, the impact on house-building was limited, thus the Chancellor George Osborne announced additional measures to improve the situation.
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