Borrowers get the message

IS THE Bank of England's interest rate medicine starting to work? The fall in retail sales figures suggests that shoppers are beginning to respond to the five quarter-point increases since November.

New data from the housing market also indicates that the message is finally getting through to borrowers.

Although the Council of Mortgage Lenders reports a surge in lending to homebuyers to a record £14.7bn, its figures are subject to a time lag and so do not yet reflect the two most recent rate hikes. It expects the numbers to fall back in the next few months.

A separate survey from the British Bankers' Association found that mortgage lending eased in July, growing by £5.7bn compared with £6.4bn the previous month.

That tallies with reports of a slowdown from estate agents and from property website Rightmove which noted a fall in asking prices of 2% in five weeks.

The Bank's hopes for a soft landing for the housing market appear to be gathering momentum.

Treasury experts, among others, have pointed to the Netherlands as evidence that a housing boom need not necessarily end in a bust.

The Dutch housing market - and that in the Republic of Ireland - have seen booms similar to ours. Rather than collapsing as feared, prices in those countries have floated gently earthward.

But property expert Ed Stansfield, at Capital Economics, has produced a fascinating note arguing that that is no guarantee against a crash here.

For one thing, it may be too early to conclude that Holland and Ireland have avoided a slump as both are part of the single currency eurozone where interest rates have yet to rise from their historically low levels. Even if higher house prices in Ireland and Holland are sustainable, it may be due to factors specific to those countries but not relevant here - such as a recent increase in the numbers of Dutch women who work.

Stansfield concludes that the current level of UK house prices cannot be justified and that a fall of 20% is needed to put the market on a more stable footing.

Housing bears have been wrong so far. But, as the Bank is acutely aware, the market remains overvalued and vulnerable to shocks.

Move on, dudes

AS they say in California, it's time to move on. Sergey Brin and Larry Page, the young Stanford-educated founders of Google, need to put the fiasco of their share float behind them and address the real challenges to their business.

The prospect of the firm's innovative share auction sparked hopes - and fears - that a new dotcom boom might be on its way.

It also led to predictions that more firms may try to emulate Google which thumbed its nose at Wall Street's cosy investment banking club by shunning a traditional share offer.

In the event, Google had to cut the price and the number of shares offered, though some say it is still valued too high.

A series of silly errors - including an interview published in Playboy when it should have been in purdah - gave investment bankers the chance to crow.

Brin and Page deserve at least one cheer for trying to buck the stuffy, self-serving system.

But it has to be said that the company did not help itself, as its communication with both investors and the press was often either confusing or absent.

Google's West Coast unconventionality has been one of the keys to its success. Following the float, however, investors' patience with silly antics is thin.

The company has transformed itself from a tiny start-up to a global household name. It must now prove that it can cut it as a mature business. Shareholders want less cutesy California-speak and more hard facts about its growth plans, in particular, what will be done with the money raised.

The key challenge for Google, which makes its money from advertisements that pop up alongside search results, is to expand beyond its roots without losing its irreverent and innovative edge. It faces mounting competition from the likes of Microsoft and Yahoo!, as well as the next generation of young internet entrepreneurs.

The boys from Stanford University should leave the lava lamps and the cuddly dogs to one side and concentrate on winning over the grown-ups.

Weather eye

SO JJB Sports and other stores are blaming the weather for a drop in clothing sales.

I realise that retailers are not meteorologists. But surely you don't have to be John Kettley to work out that the best attire for the British summer is often a raincoat.