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The Bank of England has today decided to increase rates by a quarter of a percent. This brings the rate to 4.75%. The increase has been made in order to keep inflation from rising further. Inflation rose to 2.5% in June – above the government’s target of 2%.
A rise had been expected, but many analysts had been forecasting it to occur later in the year.
Nationwide’s figures for July show that house prices grew by 0.8%. This more significant rise follows three months of slow growth in the property market, and pushes the annual growth rate to 5.9%. This brings the average house price to £167,733.
Fionnuala Earley, Nationwide’s Group Economist, said “Indicators of market activity suggest that housing market demand remains fairly buoyant. This will help to support prices, at least in the short term. House purchase approvals picked up surprisingly strongly to 120,000 in June to equal the peak at the turn of the year. Indicators of demand early in the house purchase process have also been fairly positive. Estate agents’ stock to sales ratio is a good indicator of changes in the balance of supply and demand in the market and of the direction of house price movements a few months later. The stock to sales ratio has been climbing since the summer of last year. However, the ratio has been broadly stable for the last three months which may suggest some softening in price increases in the latter part of the year.”
The Government has recently announced a major change to the Home Information Packs (HIPs) due to come in to force next year. Housing Minister Yvette Cooper said the packs will no longer require a Home Condition Report (HCR) to be included.
The HCR was to be a major part of the packs, telling buyers about the state of a property. However, Yvette said that the survey part of the packs needed further testing before coming in to force.
The packs are also supposed to include information on local searches, the title deeds, energy efficiency measurements and answers to some standard questions. They were aimed at reducing the time between an offer being accepted and the completion date. However, the packs have come up against quite a lot of resistance, with many believing they will just cost people more money. Could you trust a survey paid for by the person selling the house? Many buyers may decide to get their own done anyway.
The plans had also met opposition from other parties, with Tory Michael Gove, saying the plans are now “a complete shambles”.
The Bank of England’s Monetary Policy Committee (MPC) has today voted to keep the base rate at 4.5%. The move (or lack of it) was widely expected by analysts.
However, it is generally expected that rates may rise before the end of 2006. Rising inflation has led people to believe the MPC will decide to increase the base rate in the coming months in order to keep inflation in check.
This has been reflected in rises in fixed rate mortgage deals already, with many rising by up to 0.5% in the last few months.
House price data from Halifax has shown that house prices fell by 1.2% on average in June. The fall was unexpected after a promising start to 2006 for house prices.
Overall this contributes to a 4.5% increse in house prices in the first 6 months of 2006, and a 2.6% rise in the second quarter.
The Halifax also found a decline in the level of activity, with mortgage approvals from March to May down 4% compared with the previous three months after adjusting for seasonal differences.
The lender believes there are sound fundamentals to support continued growth in 2006, with high employment figures, and low interest rates. It does also add though, that any growth will be limited by rises in utility bills and council tax putting pressure on consumers. Rising rates for fixed rate mortgages may also temper demand.