The UK’s two biggest lenders disagreed on the rate at which house prices rose last month but are in agreement that house price growth is set to slow in the coming months.
According to Nationwide, price rises in August were more modest than in recent months at only 0.4%, down from 1.1% in July, and the average house price was £90,361, compared with July’s figure of £89,962. Although Nationwide acknowledges this could signal a slowing in the market, it believes it is too early to be certain. Nationwide has revised its forecast for the year to 11%, January’s forecast was for 7%.
Alex Bannister, Nationwide’s group economist, commented: ‘Much of the recent increase in sales is due to the south east, with more modest turnover seen in the rest of the UK. Annual growth is expected to increase to around 15% in the third quarter in London compared with 10% in the second quarter.’
Although Nationwide sees enough momentum to carry the market through to the end of the year in buoyant fashion, it believes the rises in the south east are unsustainable and advises prudent lending policies.
Halifax has reported an increase in the monthly change in house prices for August to 1.5% from 0.7% in July, noting that the monthly change has reverted to that of both May and June. While conceding that recent rate cuts and a fall in unemployment have boosted housing demand, Halifax still predicts slower growth in the coming months.
Martin Ellis, Halifax’s group economist, said: ‘The buoyancy of both the housing and mortgage markets indicates that the marked slowdown in the world economy and the recession in the UK manufacturing sector have so far had little adverse impact on consumer sentiment. There are, however, increasing signs that manufacturing’s problems are spreading to other sectors of the economy. This development is likely to impinge on home-buyers’ confidence, curbing housing demand and causing house price inflation to ease.’