House Price Growth 'Begins To Stabilise'
Further evidence has emerged that the housing market is beginning to stabilise amid tougher mortgage affordability rules and warnings of looming rate rises.
The latest house price study, conducted by Halifax, reported a 0.6% fall in average costs month-on-month in June though. However, in the three months to June, price growth accelerated to 8.8% on an annual basis.
The Halifax said this marked the strongest year-on-year uplift since October 2007 and took the average cost of a property to £183,462.
Stephen Noakes, mortgages director at Halifax, said: "Housing demand continues to be supported by an economic recovery that is gathering pace, with employment levels growing and rising consumer confidence, although real earnings growth remains sluggish."
The findings on annual price growth largely mirrored those of rival Nationwide, which last week reported average year-on-year growth of 11.8%, taking values past their 2007 peak to stand at a new all-time average high of £188,903.
But in a paper on the state of the UK housing market, the chief UK economist at Berenberg Rob Wood, wrote that while the latest Halifax figures showed the pace of price increases was not slowing, the calculations showed housing costs had stabilised.
He pointed to quarterly figures reported by Halifax as being more reliable, measuring growth of around 2% consistently since June 2013.
"Tighter regulations and the real chance of an interest rate hike this year have stabilised leading indicators and actual price inflation at current strong rates.
"We look for house prices to gain 10% in 2014 and 10% in 2015", he said.
A key factor supporting price growth has been a shortage of new homes as builders struggle to return to pre-financial crisis levels of construction while costs in London have soared well above national averages.
But there have been signs that the worst of the heat is easing.
The introduction of toughened lending rules at the end of April, which force lenders to conduct financial stress tests on buyers and those looking to remortgage, have been reported as putting many people off potential purchases though the impact may be temporary.
The Bank of England also recently announced new curbs on riskier lending, with loans of 4.5 times a borrower's income or higher accounting for no more than 15% of new mortgages issued by lenders.
The Bank also said that lenders should ensure that borrowers can keep up their mortgage repayments in the event of a rise of up to 3% in interest rates over the first five years of the loan.