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US and UK Begin Tapering Fiscal Stimulus in The Housing Market

Amid inflation in Europe and the US, UK house prices rose 13.4% higher in June in comparison to a year earlier. This marks the fastest rise in 17 years.

The market is benefiting from mortgage rates which are close to all-time lows and a temporary tax break on purchases. The Bank of England is concerned about the figures and policymakers weigh whether to reduce fiscal stimulus. The Treasury will phase out the mortgage tax break over the summer. By the end of September, the exemption will be eliminated.

In the US, the Federal Reserve (Fed) is considering similar changes. The Fed is debating whether to start reducing purchases of mortgage-backed bonds and avoid increasing the massive purchase of the real estate. Since March 5, the Fed has bought 982 billion in mortgage-backed bonds and plans to continue purchases to keep borrowing costs low and continue to stimulate the economy. But at the same time, it is considering reducing its stimulus support.

Both the US and Britain are confident that the economy will recover while gradually withdrawing their financial support from the housing market.

The Oil Boom

For the first time since the years leading up to the 2008 housing and economic crisis, central banks are starting to worry about rising inflation data, spurred by the commodity boom.
Metals and oil have reached multi-year highs. Oil is hovering around $75 a barrel, up from just over a year ago. Russia and Saudi Arabia are once again leading the market. Brent prices are up 45% so far this year and, according to Bloomberg, Wall Street banks and traders are once again talking about the possibility of prices rising above $100 a barrel for the first time since 2014.

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