Forex »

Moderation In UK House Price Growth

James Boston
Share on StockTwits
Published on
www.finances.com
Moderation In UK House Price Growth

The pace of growth in house prices in the UK decreased during the month of July according to the latest Nationwide House Price index. The year on year figure is now reading at 10.6% growth on a non seasonally adjusted basis, this represents an increase over the June reading of 11.8% and doesn’t quiet come in as high as the market consensus which was expecting 11.3% expansion this month. The July month on month figure is only exhibiting minor growth at 0.1%, this seasonally adjusted figure is in comparison to the 1.0% expansion seen in June and an anticipated reading of 0.5%.

Although British house price growth remains in double digits the cooling experienced this month is welcomed. Market consensus expected higher figures but the Bank of England (BoE) doesn’t appear to be showing any surprise at the pace reduction. Deputy Governor, Ben Broadbent, noted in an interview published this morning that turnover and mortgage approvals had begun weakening six months ago and that it is therefore no surprise that the same weakness is now becoming apparent in pricing. He went on to suggest that this slowing in house price growth would have an impact on the overall UK growth rate.

The Chief Economist with Nationwide, Richard Gardner, expressed no surprise at the slowdown in the UK housing market. Citing indications of a moderation in activity in recent months he noted that mortgage applications had fallen by about 20% between January and May of this year. With regard to near term future house price growth, Gardner noted that new buyer enquiries are falling and that this is likely to have an impact on demand and therefore prices.

Should this trend continue then the Bank of England will have some scope to delay it’s impending interest rate hike, particularly given the suggestion by Broadbent that the wider economy could be affected by this house price slow down.

Share on StockTwits