Friday 31st August 2007
The property market could be nearing the end of its recent boom due to elevated interest rates and risky stock market conditions, it has been claimed.
Nationwides House Price Report for August shows a slowing in the rate at which UK property prices are increasing.
Actual house prices were seen to fall over the course of the month, from an average of £184,270 in July to £183,898 in August.
But after seasonal adjustment, Nationwide notes that this still represents a growth of 0.6 per cent over expected values.
Year-on-year, the slowing in the market is also reflected in an annual growth of 9.6 per cent to August compared with 9.9 per cent a month earlier.
The combined effect of stock market turbulence and multiple rises in the Bank of Englands base rate of interest is cited as a likely cause of the deceleration in house price inflation.
Chief economist Fionnuala Earley explains: "The overall extent of any damage to economic growth and hence the housing market will depend on the length of the credit crunch and the monetary policy response by the Bank of England."
Figures published by the Royal Institution of Chartered Surveyors (Rics) detect a 32 per cent rise in repossessions over the second quarter of 2007.
Rics economist Oliver Gilmartin proposes: "With the full impact of interest rate rises in 2007 yet to filter through into higher mortgage costs we continue to expect a rise in the number of homes going under the hammer into 2008."
But in light of statistics from the Bank of England showing persistent strength in the number of mortgage approvals, he adds that "another interest rates rise may be necessary before year-end".
His assertion is contradicted by the Council of Mortgage Lenders, which argues that if there is a prolonged tightening of credit conditions "the case for the bank to cut rates will strengthen".
©
Everything on preparing your finances for your children's futures. From Child Trust Funds through to tax planning. Request your FREE brochures here.
