Housing market starts to wane

28 February 2007

There’s evidence that the recent rises in interest rates are beginning to have an impact on the housing market. In its monthly housing survey, the Nationwide said interest among buyers and demand for mortgages was beginning to wane following the rate increases.

The Bank of England has raised interest rates three times since last summer, by a quarter of a point each time, in August, November and January.

However, the Nationwide’s survey still showed that house prices were up by 0.7% in February – which puts annual price growth at 10.2%, up from 9.3% in January. The building society said house price inflation would stay firm for a while, because of a lack of properties for sale.

But the mortgage lender points to a drop in new mortgage approvals and fewer enquiries from would-be buyers at estate agents as evidence that the market may be about to cool off in the wake of the recent increases in interest rates.

Nationwide’s chief economist, Fionnuala Earley, said: “The annual rate of house price growth will remain close to 10% until late spring. By the second half of 2007, we continue to expect to see a more pronounced slowdown.”