Hi I have been listening with interest your commentary around potential inflation. Could you explain please how house price inflation and also rental inflation is not included in the national inflation numbers? It strokes me the inclusion of both would push actual inflation significantly over the 2% target. Given that mortgage repayments and rents for housing is predominantly paid from people's current income both outgoings have a real effect on the ability of people to consume. Thanks Pat
It’s mostly history and technical difficulties. Although it doesn’t seem like it, the average consumer neither rents nor has an average mortgage - or a mortgage at all. How much an interest rate change affects an individual mortgage holder varies wildly with the size of the mortgage and how large the interest component of the repayment actually is. Some countries try to calculate ‘imputed rents’. Other don’t bother. The ECB recently announced it will make an attempt to incorporate housing inflation more directly into its decision making.
Hi I have been listening with interest your commentary around potential inflation. Could you explain please how house price inflation and also rental inflation is not included in the national inflation numbers? It strokes me the inclusion of both would push actual inflation significantly over the 2% target. Given that mortgage repayments and rents for housing is predominantly paid from people's current income both outgoings have a real effect on the ability of people to consume. Thanks Pat
Pat, housing is captured in the CPI. Local authority rents, private rents and imputed rents are all included.
It’s mostly history and technical difficulties. Although it doesn’t seem like it, the average consumer neither rents nor has an average mortgage - or a mortgage at all. How much an interest rate change affects an individual mortgage holder varies wildly with the size of the mortgage and how large the interest component of the repayment actually is. Some countries try to calculate ‘imputed rents’. Other don’t bother. The ECB recently announced it will make an attempt to incorporate housing inflation more directly into its decision making.