Money News
Latest housing market data from the Halifax has confirmed the year-on-year fall in house prices reported by the Nationwide Building Society earlier this week. House prices fell by 1.3% in April, giving a year-on-year decline of 0.9%. That's the first year-on-year fall since February 1996. The standardised average house price (seasonally adjusted) now stands at £189,027.
Britain's biggest mortgage lender expects a mid single digit percentage decline in house prices this year, although there will be regional variations - Scotland likely to record modest price rises whilst other parts (Wales and West Midlands) are expected to see falls above the national average.
The decline in prices is being driven by a squeeze on spending power and the rapid rise in house prices in the last few years. These factors have curbed housing demand. Meanwhile, the rise in interest rates between August 2006 and July 2007 has increased average mortgage costs, while a decline in 'real' earnings over the past year has crimped housing demand.
A growing - albeit slowing - economy, high employment levels, low interest rates and a shortage of new homes continue to underpin housing valuations however. The economy grew at an annual rate of 2.5% in Q1 2008 - in line with the long-term average - whilst employment increased by 152,000 in the three months to February compared with the preceding quarter. It now stands at a record high 29.5 million.
More Bank of England interest rate cuts are expected over the coming months as signs of the expected economic slowdown accumulate. This evidence will help to allay the MPC's concerns regarding inflation over the medium term, providing scope to reduce rates, says the Halifax.
02 May 2008 © Moneyextra.com
Moneyextra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.