Money News
Latest data from the Halifax shows house prices increasing by 0.3% in May, giving an annual increase of 10.6%. That's the second straight year-on-year fall from March's peak of 11.1%. The standardised average house price (seasonally adjusted) now stands at £196,893.
Commenting on the figures, Martin Ellis, chief economist, said the recent slowing in monthly house price inflation, together with further evidence of moderation in housing market activity, suggests that the interest rate rises since last summer are having an impact on the market.
He adds that higher interest rates, the negative trend in real earnings growth and rising food prices are likely to bite increasingly on householders' finances over the coming months, curbing housing demand. House price inflation is expected to moderate as a result. The market, however, remains supported by solid economic foundations which, together with supply shortages, will continue to support prices.
Meanwhile, David Stubbs, senior economist over at RICS (Royal Institution of Chartered Surveyors) said the Halifax data provides evidence that the housing market slowdown is now well and truly underway.
"With mortgage rates continuing to rise, first time buyers are finding it increasingly difficult to afford the massive mortgages they now require to get on the ladder.
"Although the housing market will continue to slow in coming months, good economic conditions and a lack of homes for sale will continue to support prices and prevent the crash that some commentators continue to predict.
However, if interest rates were to rise to 6% before the end of the year, a sharper slowdown and a difficult 2008 would be on the cards," he notes.
07 June 2007 © Moneyextra.com
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