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UK House Price Growth Cools

James Boston
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UK House Price Growth Cools

The Halifax House Price Index rose less than expected according to the August data just released. UK house price growth however still shows no real signs of cooling. The year on year growth rate has fallen to 9.7% from 10.2%, analysts were expecting a reading closer to 9.9% in this traditionally quiet month for property transactions. The month on month increase came in at just 0.1% expansion compared to the revised 1.2% number from the month before, this was anticipated higher at 0.3% according to market analyst predictions.

The Halifax house price report noted comments from the groups chief housing economist, Martin Ellis, that supply of both new and second hand homes is improving and that this should lead to an easing of the upward pressure of prices. The prospects of an increase in interest rates in the not to distant future is also likely to contribute to a curbing of demand for mortgages according to Ellis.

Today’s fall in the house price index will take some pressure off the Bank of England (BoE) which has recently been encouraged, by the IMF and others, to tighten up on monetary policy in order to bring house price growth back into line with general economic expansion. The Bank has so far resisted on the basis that the bulk of house price growth is regionalised and that any blunt moves by the monetary policy committee risk damaging not only the slower growing regions of the market but also the general economic recovery.

Macroprudential policy announced by the Bank’s Financial Policy Committee earlier in the summer is set to kick in later this month, this policy will impose limits on mortgage lending, particularly at the high end of the market. There is no certainty that these moves will have any measurable effect, lenders have already implemented many of these restrictions in preparation for the regulation and to date only a moderate cooling in prices has been recorded.

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