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| UK house-price rise may lift rates |
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Release time:
2007-7-6 10:42:35 Visit
frequency:
56
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The growth in housing prices in the United Kingdom accelerated in June, supporting Bank of England Governor Mervyn King's call last month to raise interest rates for the fifth time since August, a report from HBOS Plc showed.
The average cost of a home in Britain rose 0.4 percent last month to 197,461 pounds (US$399,000), compared with 0.3 percent in May, the UK's biggest mortgage lender said in a statement yesterday. In the three months through June, prices rose at the slowest pace since the third quarter.
Bank of England policy maker Kate Barker told lawmakers last month that the UK property market is being fueled by "relatively low" rates and a shortage of supply. While King has said there are some signs the housing boom is slowing, economists expect the bank to raise its benchmark by a quarter point to a six-year high of 5.75 percent today.
"Solid economic fundamentals and a shortage of housing supply will continue to support house prices," said Martin Ellis, chief economist at HBOS Plc, in the report. Higher rates may still slow the house market "over the coming months," he said.
Prices in Northern Ireland rose the most in the second quarter, climbing 8.5 percent, while values in London gained 4.9 percent, HBOS said. Prices in Wales fell 2.8 percent. The average price in the north of England rose above 150,000 pounds for the first time in the second quarter, climbing to 155,188 pounds.
Values climbed two percent in the second quarter from the first three months of the year. That's down from the 4.2 percent increase reported in the fourth quarter and is the slowest quarterly increase since the three months ended September.
The Bank of England is expected to increase its main rate after the consumer-price index held above its two percent target for a 13th month in May, according to 53 of 60 economists in a Bloomberg News survey.
Investors have raised bets on a further move to six percent later this year after minutes from the June meeting showed King favored tightening policy last month. He was outvoted five-four by colleagues.
The implied rate on the December futures contract rose two basis points to 6.28 percent in London early yesterday. The contract settles to the three-month London interbank offered rate for the pound, which averaged about 15 basis points more than the central bank benchmark for the past decade. A basis point is 0.01 percentage point.
Reports for the last month have sent mixed signals about the buoyancy of the UK's house market. While Nationwide Building Society, the country's third-biggest mortgage lender, said last week that house prices rose 1.1 percent in June from a month earlier, London-based research company Hometrack Ltd said values in the same month climbed at the slowest pace since December.
HBOS said prices rose 10.7 percent in the three months through June from a year earlier. A separate report showed that UK consumer confidence fell in June for the first time in six months as higher interest rates sapped optimism about the economy.
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