Posted: Wed Mar 28, 2007 9:51 am
Higher rates take fizz out of housing market
Higher borrowing costs are beginning to take some of the fizz out of the housing market, the Nationwide confirmed on Wednesday.
The average price of a home in March was £177,083, a month-on-month increase of 0.4 per cent.
This was softer than the 0.6 per cent increase in February but was nevertheless the 13 th consecutive month that prices have risen. It leaves annual house price inflation at 9.3 per cent, said the UK’s biggest building society.
Signs that the housing market may be cooling will be welcomed by the Bank of England as it seeks evidence that its three interest rate rises since August have started to bring inflation back towards the government’s 2 per cent target.
The Bank does not seek to influence house prices directly but it recognises that a burgeoning property market can translate into increased spending by consumers, which can add to inflationary pressures.
Furthermore, a volatile market can make monetary policy-making more difficult.
Mervyn King, Bank governor, on Tuesday told MP’s that he thought the housing market was slowing and that prices were to fall modestly, the economic impact would be small.
A large fall would be ”much more severe” for the economy, though he stressed this was unlikely to happen.
Further evidence that the housing market may be losing a bit of pep was provided on Tuesday by the British Bankers’ Association. The BBA said that approvals to purchase a home – seen as a good guide to future near-term activity in the market – had fallen by 5 per cent to 54,659 in February compared with the same month last year.
Fionnuala Earley, Nationwide’s chief economist, said: ”Mortgage approvals and buyer enquiries at estate agents have weakened since the start of the year and we expect that this will continue as the dampening effect of the earlier interest rate rises feel through”.
Howard Archer at Global Insight, the consultancy, said house prices were likely to remain relatively well supported in the near term, with any slowdown a gradual process.
“Nevertheless, we suspect that over time the growing affordability pressures resulting from higher interest rates, only moderate real disposable income growth and elevated house prices will seep through to squeeze buyers out of the market and limit house price rises, “ he said.
Source: ft.com 28.03.07
Please post any news stories about IVAs here:
http://www.iva.co.uk/forum/default.asp?CAT_ID=5
See my Blog:
http://ivanews.blogs.iva.co.uk
Higher borrowing costs are beginning to take some of the fizz out of the housing market, the Nationwide confirmed on Wednesday.
The average price of a home in March was £177,083, a month-on-month increase of 0.4 per cent.
This was softer than the 0.6 per cent increase in February but was nevertheless the 13 th consecutive month that prices have risen. It leaves annual house price inflation at 9.3 per cent, said the UK’s biggest building society.
Signs that the housing market may be cooling will be welcomed by the Bank of England as it seeks evidence that its three interest rate rises since August have started to bring inflation back towards the government’s 2 per cent target.
The Bank does not seek to influence house prices directly but it recognises that a burgeoning property market can translate into increased spending by consumers, which can add to inflationary pressures.
Furthermore, a volatile market can make monetary policy-making more difficult.
Mervyn King, Bank governor, on Tuesday told MP’s that he thought the housing market was slowing and that prices were to fall modestly, the economic impact would be small.
A large fall would be ”much more severe” for the economy, though he stressed this was unlikely to happen.
Further evidence that the housing market may be losing a bit of pep was provided on Tuesday by the British Bankers’ Association. The BBA said that approvals to purchase a home – seen as a good guide to future near-term activity in the market – had fallen by 5 per cent to 54,659 in February compared with the same month last year.
Fionnuala Earley, Nationwide’s chief economist, said: ”Mortgage approvals and buyer enquiries at estate agents have weakened since the start of the year and we expect that this will continue as the dampening effect of the earlier interest rate rises feel through”.
Howard Archer at Global Insight, the consultancy, said house prices were likely to remain relatively well supported in the near term, with any slowdown a gradual process.
“Nevertheless, we suspect that over time the growing affordability pressures resulting from higher interest rates, only moderate real disposable income growth and elevated house prices will seep through to squeeze buyers out of the market and limit house price rises, “ he said.
Source: ft.com 28.03.07
Please post any news stories about IVAs here:
http://www.iva.co.uk/forum/default.asp?CAT_ID=5
See my Blog:
http://ivanews.blogs.iva.co.uk