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UK house prices edged down in July to an average of £285,044, marking a fourth consecutive monthly decline, but with the market showing increased activity, according to data from Halifax.
The average house price fell 0.3 per cent last month, broadly in line with a 0.2 per cent drop reported last week by rival lender Nationwide.
But the Halifax data showed an annual fall in July of 2.4 per cent, slower than the 2.6 per cent rate of decline reported in June and less than the 3.8 per cent reported by Nationwide.
The figures suggest the housing market has so far proved relatively resilient in the face of the sharpest rise in interest rates for 35 years.
Kim Kinnaird, director at Halifax Mortgages, said activity among first-time buyers in particular had held up relatively well, with people settling for smaller homes in order to offset higher borrowing costs.
Although house prices were likely to continue falling over the coming year, she said, given strong wage growth and only a modest increase in unemployment, she expected “a gradual rather than a precipitous decline”.
Martin Beck, chief economic adviser to the EY Item Club, said one reason for resilience was that higher official interest rates were feeding through only slowly to mortgage holders as fixed-rate deals expired.
The average interest rate on the existing stock of UK mortgages had risen only to 2.93 per cent as of June, even though lenders were quoting rates of around 6.85 per cent for a typical new two-year fixed mortgage.
Ben Broadbent, Bank of England deputy governor for monetary policy, noted last week that the latest rise in the BoE’s benchmark rate, to 5.25 per cent, had not triggered any further rise in expectations for interest rates two or three years ahead — by which mortgage rates are set.
The BoE also noted that, while the fall in nominal house prices had been relatively modest so far, high consumer price inflation meant they had already fallen more sharply in real terms.
However, most analysts expect price falls to continue over the year ahead.
The buy-to-let market is one source of uncertainty, with landlords facing both rising mortgage costs and tougher regulation. The BoE thinks exits by landlords have not yet had a significant effect on prices. But Kinnaird said the sector was under pressure and “it remains to be seen . . . what that could mean for the supply of properties available to buy”.
Beck cautioned that although many homeowners had healthy savings, and others were extending their mortgage terms in order to cope, “these sources of support will only go so far”.
Imogen Pattison, assistant economist at the consultancy Capital Economics, said that despite better recent news on inflation, mortgage rates were likely to remain near their current levels for the next year, leading to a “renewed slump in demand” and accelerating falls in house prices later this year.
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