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House prices up 8.8%, but are moderating

House prices up 8.8%, but are moderating

Category: Mortgages

Updated: 09/07/2014
First Published: 09/07/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

House price growth continues to remain strong, according to the latest Halifax House Price Index, with the typical UK property standing at £183,462 – 8.8% higher than June 2013 when the average price of a UK home was £167,668.

On a quarterly basis prices have increased by 2.3%, however this pace of growth isn't continued when looking month-on-month. In fact, prices have actually dropped by 0.6% from May when the typical property cost £1,104 more (£184,566), representing the fourth monthly decline since December.

So, just what's the reason behind this monthly drop? Arguably, tighter lending restrictions, not to mention rising prices themselves, could have had a part to play, assumptions backed up by additional data. Figures from HMRC, for example, show that home sales edged down by 3% in May, falling below 100,000 for the first time in six months, while RICS reported that new buyer enquiries fell for the sixth consecutive month which, if sustained, "could moderate further growth in demand".

Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), commented on the latest findings: "While the latest Halifax data shows house prices were up 2.3% in the quarter and 8.8% year-on-year, the fact that new buyer enquiries have now fallen for six successive months suggests some of the hype that was engulfing the market has started to fade away.

"The improving outlook for housing is certainly tempting some owners to cash in on their equity gains, but the hoard of buyers will be kept in check as people – especially would-be first time buyers – pause to gather the necessary funds to keep up with rising costs. New affordability measures are also injecting a sense of perspective as borrowers are encouraged to think more carefully than ever about taking out a loan."

The slower pace of growth should be welcome news for those that might have been worried about the market approaching bubble territory, as it already seems to be showing signs of correction. It's still a strong recovery, however, and this kind of moderated growth is no bad thing either, as Brian Murphy adds:

"Having languished in negative equity, there are plenty of homeowners who have only been able to move thanks to recovering prices so we shouldn't be uncomfortable with growth, providing it is moderated. What's important as people adapt to this new reality is that mortgages are only granted in the right circumstances. All the necessary measures are now in place to make sure that happens."

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