An article in financial industry newspaper 'Financial Adviser' last week has said that financial advisers and the industry alike have poured scorn on the Government's new House Price Index.
The Government's index bases house price inflation on the actual rise in average completion prices rather than what many lenders indices do which is review the average "offer price".
Many advisers are saying this is irrelevant. For example, in August: Halifax Property Index was 19.1%, Nationwide's was 16.6% and the Government's was 13.4%.
Our view
An irrelevant debate. Perhaps mortgage lenders need house price indices to be higher to drive the market forward whereas the Government need to slow it down.
In this debate, we support the Government stance. House prices rises can only be based upon the actual completed sale prices and not what an offer is accepted on - many offers fall through!
We accept though that there is a time lag between offer, acceptance and the final completion of a purchase. However, this time next year, when time-lags are technically accounted for - the Government's view will be the right benchmark. It is after all, the Government's task to manage the economy and the Bank of England to manage inflation through interest rate control.
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