UK house prices on the boil again
Business World - Ireland

July 29, 2004
UK house prices came back to the boil in July, marking their biggest year-on-year
gains since May 2003, reinforcing expectations for an interest rate hike
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UK house prices came back to the boil in July, marking their biggest year-on-year gains since May 2003, reinforcing expectations for an interest rate hike next week.

The Nationwide Building Society said today that house prices soared 2.1pc in July, the biggest monthly gain since February, and were up a hefty 20.3pc compared with a year earlier.
The figures, which defied expectations of a slowdown, are sure to be of concern to the Bank of England, which is keen to cool house price inflation gradually with interest rate rises in order to avoid a damaging crash.



The data are likely to cement even further already solid expectations for a quarter-point hike in the base rate to 4.75pc next week after four such rises since November.

The sudden gains in July followed a month of slower - but still strong - growth in June and some tentative evidence from other surveys that the housing market may have finally begun responding to higher interest rates.

But Nationwide flatly said that was not the case. "Whilst recent anecdotal and survey evidence have suggested the housing market might be starting to slow, our own house price data accords with the recent strength of retail sales and mortgage lending," Nationwide economist Alex Bannister said.

Mortgage lending hit a record last month since comparable records began in 1997, according to data published this week from the British Bankers' Association.

Figures from the BoE later today are expected to show that Britons have piled up over 1 trillion pounds in debt - partly due to ever-larger mortgages to finance soaring house prices.