Inflation Slows In May

Inflation Slows In May

(Source: Country Life)

Nationwide's figures for May saw house price inflation slowing slightly as the market responded to further rises in inflation.

Monday, 04 June 2007

Holly Kirkwood

House price inflation slowed from April to May, down to 0.5% from 0.9% in April, according to the latest figures from Nationwide. However, the annual rate remains in double digits, at 10.3% bringing the average price of a property to £181,584, almost £17,000 higher than at the same time last year.

Three-month on three-month inflation has fallen to 1.8% as a result of interest rate rises, the report says, bringing quarterly inflation to its lowest level since August 2006. Nationwide also predicts there will be further rises before the end of the year: 'We now expect there is a strong chance that rates will be increased once more this year, to 5.75%. higher interest rates clearly present risks to the housing market, but providing the economy, and particularly the labour market, remain in good shape we should be able to expect a measured cooling,' the report says.

In addition, it notes that the effect HIPs, and the Government's decision to postpone their introduction until August, will have on the market, remains to be seen: 'Given that the cost of a HIP is estimated to be around £500, the cost itself is not likely to be a big disincentive to sellers who wish to market their property seriously… the majority of the cost will simply be transferred from the buying to the selling stage in a property transaction,' according to Fionnuala Earley, Nationwide's chief economist.

Overall the report found that there are signs of cooling in the market, and further rate rises are expected to induce caution in would-be first-time buyers, as the year continues which will of course have a slight effect on the market as a whole, it predicts.

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