Many UK property buyers believe that house prices will continue to fall for between one and two years, according to latest poll. Additionally, a significant number of Britons are hoping that house prices continue to decline with the expectation that they will climb the property ladder.

But figures released by the Office of National Statistics show that Retail Prices Index, which includes mortgage costs, rose to 4.3% from 4.2% the previous month. The breach of the official 3% target for the Consumer Prices Index yesterday triggered a warning letter from Bank Governor Mervyn King to Chancellor Alistair Darling. Tuesday’s inflation figures exposed how families are being squeezed by rising prices.

Independent research has revealed that 46% of the UK’s adult population say that being able to afford to live, making ends meet and servicing current debt levels, is their number one challenge over the next year. According to the research commissioned by credit reference agency Callcredit, this is over ten times the number of people who say they are most concerned about mortgages or the risk of redundancy (4%).

The current credit crunch crisis has seen more women getting concerned about surviving the financial downturn than men (50% vs 41%) and concerns are highest among the 35 – 44 age group (57%).  Almost four out of ten people (38%) describe themselves as pessimistic about their finances over the next 12 months compared to one in five people who are optimistic. Negativity peaks among the over 55 age group with 41% describing their attitude as pessimistic.

The Conservative party have also pointed out that inflation was now nearly double the figure when Labour came to power in 1997. Shadow chancellor George Osborne said: “Instead of a government that helps people with a rise in the cost of living, Gordon Brown’s only plans to get us out of this economic mess are tax rises on family cars, alcohol, and council tax.”

Mr King warned this week that CPI is likely to remain markedly above the target until well into 2009. He said: “I must stress, however, that there are considerable uncertainties in both directions around this, and any such projection is particularly sensitive to changes in domestic gas and electricity prices.”

In a glimmer of positive news, the Governor did suggest that interest rate rises were unlikely. However, according to economist Howard Archer, of City firm Global Insight, the one thing that can be said with a fair degree of confidence at the moment is that interest rates will not be coming down further any time soon and that if the Bank of England does act in the near term it will be to raise interest rates.
A study released Wednesday by online property portal findaproperty.co.uk found that 33% of Brits perceive the house prices decline will last for a year, with a further 32% saying the market will hit rock bottom in two years time. But despite the gloomy picture, the survey also uncovered a mood of optimism in the timeframe that the market would take to recover, with 53% of the sample believing that prices will have returned to levels at the peak of the market in 2007 within five years.