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Dampened property market growth downplayed

Recent interest rate rises from the Bank of England are not having the dampening effect on house prices many market indicators suggest, according to the Council for Mortgage Lenders (CML).Publishing its quarterly market commentary today, the CML claims that forward-looking data shows two factors are mitigating the impact of three rate hikes in five months on Britain's property market.Following the Bank's benign inflation report in February, which said consumer price index inflation would fall back to chancellor Gordon Brown's two per cent target by the end of the year, there is a growing expectation that only one more rate hike will be necessary in 2007.Meanwhile the CML reports that estate agents have reported a slackening in the number of properties on the market, exacerbating already strained supply in a market dominated by unmet demand.Together these factors suggest that the recent 'softening' caused by the base rate increasing to 5.25 per cent may not be as significant as has previously been suggested."We expect a modest softening in demand for house purchase and the number of mortgages for house purchase during the year in response to the rise in interest rates to date. But this will come to an end once it becomes clear that interest rates have peaked," the CML's commentary said."House price growth will continue to be supported by the still firm level of demand and shortage of properties available. This should mean that mortgage lending remains close to record levels through most of the year," it concluded.

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