| UK
House Prices Situation: Strong
UK
House Prices Forecast: Remaining strong at present.
Slowdown in growth expected later in 2007.
December
Sees Increase in First Time Buyers
First
time buyers were responsible for 48% of mortgages taken
out in December, in surprising figures from independent
mortgage broker Mortgages Direct. The figure represents
an 11% increase over the previous month, and would seem
to reflect first time buyers' determination to get on
the property ladder, despite the rising costs of buying
a home.
Peter
Gladdy, director of Mortgages Direct, commented that
the increase in first time buyers in December was "against
all normal seasonal trends".
House
Price Growth Likely To Have Influenced Interest Rate
Decision
The
Bank of England's decision to increase the base
interest rate to 5.25% on the 11th January
caught many people by surprise, with the widely-forecast
increase having been expected to take place in February.
Although
the press release accompanying the interest rate decision
did not mention the housing market
specifically, it did express the Monetary Policy Committee's
continued concern over inflation, which despite two
previous rises in interest rates, remains at 2.7%, significantly
above the Bank's 2% target.
The
Bank of England's economists are believed to be concerned
that a bubble is forming in the housing market which
could lead to a dramatic drop in prices – by raising
interest rates pre-emptively, it may be possible to
dampen the market more gradually, avoiding a repeat
of the property crash of the early 1990s.
RICS's
Figures Indicate Decrease in Housing Accessibility
The
Royal Institute of Chartered Surveyors, RICS, has released
new figures showing that not only are houses less affordable
than at any time since 1991, but the costs of purchasing
a house have also risen to record levels.
Mortgage
payments now account for 22% of an average couple's
monthly income, up from only 13.5% in 1996.
Similarly
the costs of buying a house have risen – fees,
taxes and deposit now require more than 81.8% of an
average couple's annual income – up from 25.2%
in 1996, and a 13.8% increase on one year ago.
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