Economics, Inflation, and UK Housing Market Dynamics

Vocabulary flashcards covering macroeconomic indicators, Bank of England monetary policy mechanisms, inflation types, and UK housing market regulations.

Inflation

A measure of how prices rise over time, which reduces the purchasing power of money.

Consumer Prices Index (CPI)

The measure used in the UK to track inflation against the Government's official $2\%$ target.

Monetary Policy Committee (MPC)

The Bank of England body responsible for keeping inflation close to the $2\%$ target, typically within $1\%$ above or below, primarily by adjusting interest rates.

General Inflation

The overall rise in prices across the economy; for example, at $2.5\%$ annual inflation, $\pounds 100$ at the beginning of the year buys goods worth approximately $\pounds 97.50$ by year end.

House Price Inflation

The increase in property prices over time, which frequently rises faster than general inflation.

Cost of Living Crisis

A period beginning in 2022 marked by high inflation and rising interest rates that exerted severe pressure on household budgets and reduced consumer confidence and purchasing power.

Interest Rate Increase (Monetary Tightening)

A measure taken by the Bank of England to reduce inflation by raising interest rates, which lowers disposable income, slows borrowing and spending, and cools property demand.

Interest Rate Reduction (Monetary Easing)

A measure taken by the Bank of England to increase inflation by lowering interest rates, which increases disposable income, stimulates spending, and raises demand for goods and services.

UK Housing Supply Problem

An imbalance caused by a shortage of new home construction combined with intense competition from buy-to-let (BTL) and foreign investors, keeping house prices supported.

Stamp Duty Exemptions

Government tax relief measures designed to make entering the property market easier for first-time buyers.

Stamp Duty Surcharge on Second Properties

An additional $3\%$ surcharge introduced in April 2016 charged on the full purchase price of second homes and buy-to-let (BTL) properties valued over $\pounds 40{,}000$.

Mortgage Interest Relief Restrictions

Government policy changes that reduced tax relief on mortgage interest for landlords to diminish the attractiveness of buy-to-let investments and ease market competition for first-time buyers.