mpc.theyserveforyou.com

mpc: 20 A third possible explanation was that the slowing of the housing market had affected consumer spending more than expected. There were two channels whereby this might have arisen: the `direct transactions' effect, whereby lower housing market activity reduces spending on durable goods normally associated with moving house; and the `collateral' effect, whereby weakening house prices reduce the amount of collateral at households' disposal. Analysis by Bank of England staff suggested that the `direct transactions' effect was small. And, for most households, the impact of the `collateral' effect was likely to be mitigated by the substantial gains in house prices seen in recent years. However, the impact of house prices on household expenditure was difficult to pin down. It was also possible that households' uncertainty about the housing market towards to the end of 2004 had led them to defer major purchases. If that were the case, then spending might rebound once uncertainty about housing market prospects faded. The housing market seemed to be stabilising. The three-month on three-month increase in house prices (averaging the Nationwide and Halifax measures) had remained positive in April. The number of approvals for house purchase and the three-month on three-month growth rate of secured lending had levelled off; the average time to sell and the Royal Institution of Chartered Surveyors' stocks-to-sales ratio had stopped increasing.