Posted: Fri Jul 13, 2007 10:39 am
House price rises slow in the face of higher interest rates
Higher interest rates significantly slowed down house price growth in June, a leading survey says today, adding to mounting evidence that the housing market is running out of steam.
The Royal Institute of Chartered Surveyors' (RICS) monthly snapshot of housing activity found that price inflation halved last month as demand cooled across most of England and Wales.
Although prices rose for the 20th consecutive month, the number of surveyors reporting a rise rather than a fall in house prices was 10.6%, down from 22.5% in May. This was below the survey's long-run average of 21.6% and the first time the balance dipped below this level since housing activity spiralled upwards at the start of last year.
"House prices have finally started to cool significantly for the first time since the recent mini-boom in the housing market got under way in 2006," said Ian Perry, RICS spokesman.
"Interest rate hikes have begun to affect the psychology of the market with potential new buyers starting to think twice before buying a home."
Last week the Bank of England's monetary policy committee raised the bank rate to 5.75%, the fifth quarter-point increase since August, taking the rate to the highest level for over six years.
New buyer inquiries - a strong indicator of the future health of the housing market - declined at the fastest pace since February 2006 as affordability was squeezed, RICS said. The only regions where inquiries did not fall were Wales, the West Midlands and Scotland. Robust price rises were maintained in London, Northern Ireland and Scotland.
RICS said that the prospect of borrowing costs moving even higher in coming months could see a more dramatic slowdown in price growth. The City expects rates to go to 6% or beyond as the MPC maintains its tough stance on inflation.
"The July rate increase may not mark the peak of the current interest rate cycle and earlier rate rises have yet to fully filter through," said Mr Perry. "A softer landing for the housing market is in store as we move into the autumn."
Surveyor confidence in the sales outlook plummeted by nearly half to the lowest level since June 2004.
Recent comments from policymakers show that the MPC still remains divided over the future path of interest rates. Despite voting for a rate hike at the June meeting, Sir John Gieve, deputy governor of the Bank, said yesterday in a speech it was important not to over-react with big jumps that could prove disruptive. Meanwhile, the external MPC member Andrew Sentance said he thought more rate hikes would be needed against a backdrop of strong global growth and demand.
Source: guardian.co.uk
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Higher interest rates significantly slowed down house price growth in June, a leading survey says today, adding to mounting evidence that the housing market is running out of steam.
The Royal Institute of Chartered Surveyors' (RICS) monthly snapshot of housing activity found that price inflation halved last month as demand cooled across most of England and Wales.
Although prices rose for the 20th consecutive month, the number of surveyors reporting a rise rather than a fall in house prices was 10.6%, down from 22.5% in May. This was below the survey's long-run average of 21.6% and the first time the balance dipped below this level since housing activity spiralled upwards at the start of last year.
"House prices have finally started to cool significantly for the first time since the recent mini-boom in the housing market got under way in 2006," said Ian Perry, RICS spokesman.
"Interest rate hikes have begun to affect the psychology of the market with potential new buyers starting to think twice before buying a home."
Last week the Bank of England's monetary policy committee raised the bank rate to 5.75%, the fifth quarter-point increase since August, taking the rate to the highest level for over six years.
New buyer inquiries - a strong indicator of the future health of the housing market - declined at the fastest pace since February 2006 as affordability was squeezed, RICS said. The only regions where inquiries did not fall were Wales, the West Midlands and Scotland. Robust price rises were maintained in London, Northern Ireland and Scotland.
RICS said that the prospect of borrowing costs moving even higher in coming months could see a more dramatic slowdown in price growth. The City expects rates to go to 6% or beyond as the MPC maintains its tough stance on inflation.
"The July rate increase may not mark the peak of the current interest rate cycle and earlier rate rises have yet to fully filter through," said Mr Perry. "A softer landing for the housing market is in store as we move into the autumn."
Surveyor confidence in the sales outlook plummeted by nearly half to the lowest level since June 2004.
Recent comments from policymakers show that the MPC still remains divided over the future path of interest rates. Despite voting for a rate hike at the June meeting, Sir John Gieve, deputy governor of the Bank, said yesterday in a speech it was important not to over-react with big jumps that could prove disruptive. Meanwhile, the external MPC member Andrew Sentance said he thought more rate hikes would be needed against a backdrop of strong global growth and demand.
Source: guardian.co.uk
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