Rates on their way down?
In response to weaker than expected economic growth, City analysts have forecast a cut in interest rates as early as this summer.
The Office for National Statistics (ONS) revised first quarter gross domestic product growth to 0.4 per cent on the quarter and 2.1 per cent on the year, down from expectations of 0.5 per cent and 2.7 per cent respectively.
At the same time, however, annual growth was increased for the years 2002 to 2004.
The gloomy economic figures will undoubtedly increase pressure on the monetary policy committee (MPC) of the Bank of England to lower the cost of borrowing. At the May monthly meeting there were voices in support of lowering interest rates for the first time in over a year, and even before the latest statistics were revealed it was thought that more would join the rate-cut bandwagon.
House prices cooling
UK house prices were down in June, taking annual price inflation to a nine-year low, according to the latest figures from Nationwide Building Society. The 0.2 per cent slide in prices comes after a 0.3 per cent rise in May, and reduces annual growth to 4.1 per cent; the annual price growth was 19 per cent this time last year.
This was the slowest rate of growth since July 1996, said Nationwide. The cost of the average UK house is now £157,791.
House prices in Greater London increased by 3.3 per cent over the second quarter of 2005, down from 4.9 per cent in the first quarter. London was still the most expensive place in the UK to buy, with an average property price of £241,344. The lowest prices were in Scotland where the average was £116,943.
Mortgage approvals down
Fears that the housing market may be in for a sharper downturn than previously though were fuelled by new data from the British Bankers’ Association (BBA). The number of mortgage approvals fell in May by almost 25 per cent compared with this time year ago.
BBA says mortgage approvals rose to 67,702 in May from 67,290 in April but were down 24 per cent from 89,289 in May last year. In terms of total value of mortgages approved, lending was down 17 per cent compared with last year.
Director of statistics David Dooks said, ‘While mortgage lending was slightly stronger in May, it is noticeable that all measures were below comparable data a year earlier, when May was a relatively weak month.’
The number of mortgage approvals is considered to be a good guide to the direction of house prices, and economists said the data pointed to a protracted slowdown in the once-booming property market.