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Property Growth 'Bounces Back'

Aug 18, 2007
House price growth surged over the course of June, according to the publication of new figures.

A study released by Nationwide indicates that property prices increased by 1.1 per cent over the course of this month. Reported to be the fastest monthly climb noted so far in 2007, the financial services firm claimed the rise was "stronger than expected". Overall, year-on-year house price inflation is now said to stand at 11.1 per cent - the highest level noted since January 2005.

With the typical house now costing 184,070 pounds - over 18,000 pounds more expensive than at the same time last year - consumers could well find their ability to make secured loan repayments squeezed.

Fionnuala Earley, Nationwide's chief economist, said: "While June's heavy rain dampened the first days of Wimbledon, it did little to check the vigour of the housing market as house price inflation bounced back during the month." Although she reported that not too much emphasis should be placed on the figures, the increase in property prices this month "will be another component" for those who believe the Bank of England should increase the base rate next month. Ms Earley added that interest rates are set to rise to 5.75 per cent in July, with the chance of a further increase to six per cent since increasing "significantly".

However, the economist also claimed that any increase to the base rate by the Bank's monetary policy committee (MPC) could have a deep impact on Britons' finances. "Real earnings growth is negative and household disposable income growth is negligible, both of which will limit consumers' spending," she suggested. Pointing to MPC minutes taken from the June meeting, she indicated that the full effect of previous rate rises "has yet to fully work through" which may cause consumers to struggle more with repayments on personal loans and utility bills. She reported that any rise to the base rate would curb the property sector "in the short-term helping to reduce the rate of growth in the second half of this year".

Despite the announcement of rising house prices this month, Nationwide reported that levels of home purchase approvals and new buyer enquiries are still "down". Overall, the financial firm reported that house prices are set to rise between five and eight per cent throughout the remainder of this year. Ms Earley claimed that although there will be "significant differences" in growth throughout the country, London is set to drive house prices due to its strong economic status and an influx of overseas investment.

Last week, figures from the Building Societies Association revealed that home loan approvals fell during May. With some 4,739 million pounds issued during the month, a decrease of 13 per cent from the same period in 2006, it was suggested that such dampened lending and the effects of previous base rate rises will continue to slow the property market over the remainder of 2007.

Meanwhile, 'new' lending fell by 17 per cent from last year which could indicate an increased difficulty among first-time buyers to make secured loan repayments.
About the Author
Abbi Rouse writes for the Loan Arrangers. Where visitors can compare loans online, and apply for the best secured loans rate available to them. To read more articles from Abbi go to http://news.loan-arrangers.co.uk
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