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UK House Prices Settle Down This Month

James Boston
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UK House Prices Settle Down This Month

There has finally been a glimmer of cooling in UK house prices according to this morning’s Halifax House Price Index. Month on month this contracted by -0.6% compared to a gain of 4.0% in May, there was an expectation that this index would fall -0.3% this month. Year on year growth however is still continuing to expand, the reading for June is showing an 8.8% increase, this represents a slight gain on the prior month’s reading of 8.7%, market consensus was for this number to come in at 8.9%.

The average house price in the UK now stands at approximately £183.5k, this compares to the average annual salary which stands at just over £27k, meanwhile average London house prices are expected to exceed £500k by the end of this year.

The Bank of England (BoE) through it’s Financial Policy Committee (FPC) has taken steps to restrict the number of larger sized mortgages in a bid to cool the top end of the market. These measures are slated to take effect in September, typically the summer period is a quiet time in the residential property markets but it is likely that the impending policy change from the BoE will stimulate market activity over the next month’s as buyers rush to get in ahead of the mortgage restrictions taking effect.

There is still some doubt however as to the likely success of the Bank’s new measures, particularly in the overheating London market. If this doesn’t show signs of settling down in Q4 then it is expected that the BoE will seek to take further action, through the FPC, in order to dampen the developing bubble. There is no feeling yet that the Bank will raise interest rates solely as a response to the growing house price situation, although there is some speculation that it will be a deciding factor in the earlier than planned introduction of monetary tightening.

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