No Crash in UK House Prices

                                                                                         

Halifax plc part of the HBOS Group, the UK's largest provider of residential mortgages and saving accounts is advising that due to rising utility and council tax bills, the householders have been more restricted. In April, May and June the average raise in UK house prices was only about 2.5 per cent, which represents an important fall compared to the first quarter of year 2006.

The fall doesn’t predict a crash in UK house prices especially that the prices had risen in all parts of the UK, apart from Wales. Actually what Mr. Martin Ellis, Halifax chief economist explained is that the rise growth in the first half of 2006 had already exceeded the banks’ and many other economists' expectations. The figures presented by Halifax show a fall in prices during June, but it seams that the annual price inflation is accelerating. The annual rate went up to more than 9 and a half per cent last month, compared to about 9 per cent the month before. The explanation given by the bank was that the market was weak a year ago, and the prices were largely flat during the first half of 2005.

There is no surprise that in the summer there is a noticeable slowing down on the market. The house price inflation in June was subdued at 0.3% reveals Nationwide, the UK's fourth largest mortgage lender and second largest savings provider and the largest building society in the world.

Global Insight that provides the most comprehensive economic, financial, and political coverage of countries, regions, and industries available from any source and recognized as the most consistently accurate forecasting company in the world, has launched the opinion through chief UK economist, Howard Archer that the recent trend of house price inflation outstripping earnings was squeezing affordability and predicted that the prices will settle back with only small rises for an relatively long period.

The Bank of England comes with its figures too to emphasise the strong revival in the willingness of people to borrow against the rising value of their homes. In the first 3 months of 2006 the mortgage equity withdrawal was about £12 bn, almost double the amount of around £6 bn which was borrowed in the first three months of 2005. The difference is obvious and the slowdown in mortgage equity withdrawal almost hit the record levels settled in 2003.

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