House prices grew by only 0.2 percent in May: Nationwide |
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Wed, 31 May 2006 09:55
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LONDON - UK house price growth in the month of May was described as sluggish based on a survey by Nationwide building society. House prices increased by only 0.2 percent in May and dragged the annual rate of house price inflation to 4.7 percent from the 4.8 percent in April.
House prices for the three months to May increased by 1.6 percent as compared to 1.7 percent in the three months to April. Nationwide felt that the shape of the market in future will be decided by the direction of the interest rates as determined by the Bank of England.
"Apart from well-known concerns about stretched affordability among first-time buyers, and the rising transactions costs that movers face, there are now further reasons to expect some cooling in the rate of house price inflation over coming months," said Nationwide chief economist Fionnuala Earley.
She added that mortgage approvals had begun o show signs of moderation, "The number of mortgages approved for house purchase has been well above trend for the last eight months and has only recently fallen back from a high of 120,000 in December and January."
The average price of a UK home is £164,632. This is a gain of £7,500 in the year. But house price inflation may be determined by the Bank of England's rate setting committee. "The impact of demand will depend crucially on whether the Bank of England actually raises interest rates. In our view, the decision is still very close," said Ms Earley.
"For now, the effects of hawkish interest rate expectations in the financial markets on fixed mortgage interest rates and press reports pointing towards the possibility of higher rates, should contribute to a cooling of house price growth."
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House prices go up in March, says Nationwide 