Inflation Slows In May

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Inflation Slows In May

(Source: Country Life)

Nationwide's figures for May saw dwelling price inflation slowing slightly as the market responded to further rises in inflation.

Monday 04 June 2007

Holly Kirkwood

House price inflation slowed from April to May down to 0.5% from 0.9% in April according to the latest figures from Nationwide. However the annual rate remains in double digits at 10.3% bringing the average price of a home to £181 584 almost £17 000 higher than at the same time last year.

Three-month on three-month inflation has fallen to 1.8% as a result of interest rate rises the report says bringing quarterly inflation to its lowest level since August 2006. Nationwide also predicts there will be further rises before the end of the year: 'We now expect there is a strong chance that rates will be increased once more this year to 5.75%. higher interest rates clearly present risks to the housing market but providing the economy and particularly the labour market remain in good shape we should be able to expect a measured cooling ' the report says.

In addition it notes that the effect HIPs and the Government's decision to postpone their introduction until August will have on the market remains to be seen: 'Given that the cost of a HIP is estimated to be around £500 the cost itself is not likely to be a big disincentive to sellers who wish to market their abode seriously… the majority of the cost will simply be transferred from the buying to the selling stage in a residence transaction ' according to Fionnuala Earley Nationwide's chief economist.

Overall the report found that there are signs of cooling in the market and further rate rises are expected to induce caution in would-be first-time buyers as the year continues which will of course have a slight effect on the market as a whole it predicts.

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