House Price Growth in the UK Slowing

Prices in December rose by an annual 6.8 per cent, representing the first decline in annual growth since October 2005, according to the Financial Times house price index. The data indicates that the market was slowing before the most recent rise in interest rates. Inflation is expected to slow further this year, and a decline in the number of transactions is forecast.

New data from the Financial Times house price index showed that house price inflation has decreased for the first time in 15 months, on an annual basis. The data indicates that the market was slowing before the most recent rise in interest rates.

Prices in December rose by an annual 6.8 per cent, down from 7.4 per cent in November, and representing the first decline in annual growth since October 2005.

With another rise in rates forecast for this year, the market in 2007 is expected to slow further, and homeowners are increasingly trying to fix the rates on their mortgages. The Council of Mortgage Lenders expects that a decline in the number of transactions is likely, affecting first-time buyers and investors in particular.

Investors in the buy-to-let market, who have increased in number over the last few years, will see the gap between mortgage costs and their rental yields increase; if interest rates stay the same or even rise further, such investors are likely to suffer as a result.

The Financial Times house price index measures every property sold in England and Wales, and it is hoped that the index will end the confusion that has previously surrounded house price changes.

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