Date issued: 31 May 2007
HOUSE PRICE GROWTH REMAINS STUBBORNLY IN DOUBLE-DIGITS
Annual house price growth remains resilient in May, but monthly rate slows
Latest rate rise will cool activity and price growth further
Threats of higher rates should signal a warning to those stretching their finances
Waiting time for HIPs grows longer
| Headlines
|
May 2007 |
April 2007 |
|
Monthly index * Q1 '93 = 100
|
359.2 |
357.5 |
|
Monthly change* |
0.5% |
0.9% |
|
Annual change |
10.3% |
10.2% |
|
Average price |
£181,584 |
£180,314 |
* seasonally adjusted
Commenting on the figures Fionnuala Earley, Nationwide's Chief Economist, said:
“House prices increased by 0.5% in May, down from 0.9% in April. However, the headline annual rate remained stubbornly in double-digits, largely due to slower house price inflation at this time last year. House prices increased by 10.3% during the year, bringing the price of a typical house to £181,584, almost £17,000 higher than at the same time last year. The underlying trend is still showing signs of slowing however. The three-month on three-month growth rate fell to 1.8% in May; its lowest level since August 2006.
“There was no surprise in the MPC’s decision to raise rates by 0.25% at their May meeting, but there is still a question over whether we will see a further increase in rates or whether the effect of falling gas and electricity prices on the CPI will continue to dominate. The inflation forecast in May’s Inflation Report was very similar to February’s analysis, in spite of factoring in an additional rate rise, but it is clear that the MPC remains in hawkish mode, reinforced by the revelation that it actively discussed increasing rates by 0.5% at the May meeting. The MPC will not be willing to take the risk that growing inflationary pressures may be disguised by falling energy prices and the tone of the minutes suggest that they will move swiftly should more buoyant data come through. For this reason, along with the momentum in the financial markets for a further rise, we now expect that there is an 80% chance that rates will be increased once more this year, to 5.75%."
For further information please see this month's full report (PDF - 52KB)
