British house prices slowing down

The British housing market continued to show signs of slowing down during July, with prices rising by just 1.3%, Britain’s biggest mortgage lender said today.

The rise is in line with the 1.2% increase seen during June, both of which are well below the average monthly gain of more than 2% reported during the previous six months, according to Halifax.

However, the increase was enough to push the average price of a UK house above the £160,000 (€242,000) threshold for the first time to stand at £161,831 (€245,211), more than double the average price five years ago.

The group said recent interest rate increases and the problems faced by first-time buyers were likely to temper house price growth over the rest of 2004 and 2005.

But it added that the strong economy, healthy labour market, low interest rates and long-term shortages in the number of homes available should continue to underpin the market.

Martin Ellis, Halifax chief economist, said: “The house price gains in June and July represent a clear step down from the 2% plus monthly price growth seen, on average, in the preceding six months.

“These figures, along with other housing indicators, suggest the market may be slowing.”

The figures are in contrast to those reported by Nationwide Building Society last week which showed house prices soaring ahead by 2.1% during July, the strongest rise for five months.

However, they are in line with data released by property website Rightmove, which yesterday said the cost of property in England and Wales fell by an average of 0.5% or nearly £900 (€1,363) during the last three weeks of July.

But despite this and other evidence that the booming housing market is finally slowing down, the Bank of England’s Monetary Policy Committee is still widely expected to raise interest rates by 0.25% tomorrow.

The committee, which begins its two-day meeting today, has so far increased rates by 1% since November to 4.5% as it tries to calm the housing market and curb consumers’ appetite for debt.