House prices to rise 16 per cent
23 June 2004
The UK's biggest mortgage lender has doubled its forecast for house price inflation this year.
HBOS revised its 2004 forecast in its latest Halifax House Price Index, predicting that house prices will go up by 16 per cent this year, rather than eight per cent, as previously predicted.
The bank explained that high levels of employment and historically low interest rates, combined with continued shortage of new housing stock helped push prices up by more than ten per cent during the first half of the year.
However, HBOS still insisted that the market was beginning to cool and stressed that the cumulative effect of recent interest rate rises and increasing difficulties for first-time buyers, would help cool the market.
"We expect the annual rate of house price inflation to fall from its current 20 per cent to 16 per cent by the end of the year," Chief economist Martin Ellis said. "This month's interest rate rise signalled a change in tactics by the Bank of England and is likely to increase the effectiveness of its efforts to cool consumer spending growth and the housing market over the coming months."
He also pointed out that the number of mortgage approvals to fund house purchases has fallen, while evidence from estate agents suggests that interest from buyers is waning.
Halifax said the market remained very strong in northern regions and Wales, with price rises outside the south accounting for around 70 per cent of the 11 per cent increase in the cost of property recorded this year.