Annual UK house price growth moderates but only just

8th September 2014


UK annual house price growth eased back to 9.7% in the three months to August from 10.2% in the three months to July according to the latest Halifax house price index.

The report found that house prices rose by just 0.1% month-on-month in August

Howard Archer, chief UK and European economist, at IHS Global Insight said: “While the Halifax house price index has been particularly volatile in recent months, there are currently signs of an underlying softening in house price growth.

“The Halifax data ties in with our view that house prices will keep on clearly rising overall through the coming months, but at a more restrained rate.”

Stretched house prices to earnings ratios, the prospect that interest rates will start to rise before long – albeit gradually – and tighter checking of prospective mortgage borrowers by lenders will likely have some limiting impact on buyer interest he notes.

“Even so, with the economy seen holding up pretty well going forward, employment high and rising, consumer confidence elevated and earnings growth likely to improve and with housing supply still tight in a number of areas, house price growth seems unlikely to fall away.

“Specifically, we expect house prices to increase by around 1.5-2.0% over the final four months of 2014. House prices are seen rising by some 6% in 2015,” Archer added.

Notably the Bank of England reported that mortgage approvals eased back to 66,569 in July after picking up to 67,085 in June from a 10-month low of 61,914 in May. June had been the first rise in mortgage approvals for five months.  The slowdown in mortgage activity between January and May was clearly influenced appreciably by the introduction of the new Mortgage Market Review (MMR) regulations that came into effect in late April, which put greater onus on mortgage lenders to assess the ability of potential borrowers to meet their initial and future mortgage payments.

Archer said: “While the overall increase in mortgage activity from May’s low suggests that lenders are increasingly getting to grips with the MMR regulations, there still appears to have been some underlying moderation in housing market activity. Significantly, July’s mortgage approval level of 66,569 was still appreciably below the 74-month high of 76,295 seen in January.”


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