05/08/2005

Housing market showing ‘modest improvement’

The housing market is showing a “modest improvement,” the Halifax has reported.

House prices increased by 0.2% in July, following a similar rise in June, the Halifax reported.

However, the annual rate of house price inflation has continued to fall, dropping to 2.3% in July – the lowest rate of growth since April 1996.

The Halifax said that there had been signs, however, of a “modest improvement” in housing market activity over the past month.

The number of loans approved for house purchase in the second quarter increased by 10% on the first quarter.

Estate agents have also reported recent modest upturns in both completed sales and enquiries by potential homebuyers, the Halifax said.

The Halifax said that Thursday’s interest rate cuts by the Bank of England to 4.5% would help to reduce mortgage payments. The Halifax said: “Yesterday’s 25 basis points cut in interest rates will reduce mortgage payments as a proportion of gross income for the average new borrower from 20% to 19% bringing it back in line with the average for the past 20 years and well below the 34% peak in 1990.”

The Halifax also said that the UK economy was in sound shape, despite the slowdown in activity in the first half of 2005. It said that employees’ earnings were growing at a robust pace with average earnings expected to increase by 4.5% in 2005 compared with 3.8% in 2004, reflecting the overall strength of the labour market.

(KMcA/SP)

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