UK house prices show biggest monthly jump in 11 years - Halifax

LONDON, Thu Jun 5, 2014 4:20pm BST

Sold new build homes are seen on a development in south London June 3, 2014.  REUTERS/Andrew Winning

Sold new build homes are seen on a development in south London June 3, 2014.

Credit: Reuters/Andrew Winning

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LONDON, (Reuters) - British house prices had their biggest monthly jump in more than 11 years in May, figures from mortgage lender Halifax showed on Thursday, putting further pressure on the Bank of England to guard against risky lending.

House prices leapt by 3.9 percent, their biggest one-month rise since October 2002 and far outstripping forecasts of a rise of 0.7 percent after two months of falls.

The news came shortly before the Bank of England held benchmark interest rates at a record low 0.5 percent, and contrasts with recent figures showing a falling number of mortgage approvals, which typically heralds slower price increases.

While the central bank has, for now, ruled out raising rates to curb rising house prices, its Financial Policy Committee is widely expected to recommend a further tightening in mortgage lending standards after it meets later this month.

"Expectations of house price gains are still elevated, and the FPC should act to prevent any further loosening of mortgage terms," said Matthew Pointon, property economist at consultancy Capital Economics.

Halifax said house prices in the three months to May were 8.7 percent higher than a year earlier, matching March's rate of growth, which was the fastest since September 2007, though less than the 11.1 percent rise reported by rival lender Nationwide.

It also noted that the number of home sales was falling, and that this was making monthly price changes more volatile.


Over the three months to May, prices were 2.0 percent higher, in line with the trend that has been in place since June last year.

"Housing demand is still strong and continues to be supported by a strengthening economic recovery," said Stephen Noakes, Halifax's mortgages director, adding that low interest rates and falling unemployment were boosting consumer morale.

However, weak wage growth and a revival in private-sector housebuilding - which was up by a third in the year to March - might temper price rises in the longer term, Noakes said.

House prices stand at almost five times average full-time male earnings, a level last exceeded in mid-2008, Halifax said.

Data on Wednesday showed that the average person taking out a mortgage was buying a house worth more than four times his or her annual earnings.

Lloyds Banking Group (LLOY.L), Halifax's parent company, said last month that it would not lend more than 500,000 pounds ($837,700) at multiples greater than four times earnings, and this week Royal Bank of Scotland (RBS.L) followed suit.

In late April, regulators required lenders to make closer checks of potential borrowers' spending patterns and to check they could afford mortgage payments if interest rates rose.

The BoE's Financial Policy Committee holds a quarterly meeting later this month, and economists say it could recommend other lenders adopt similar measures or hold more capital against high loan-to-value and loan-to-income mortgages.

(Reporting by David Milliken; editing by Michael Holden, John Stonestreet)

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Comments (2)
Raymond.Vermont wrote:
Yet not included in the inflation figures…

Everyone lives under a roof of some description!

Inflation is really a run-away train.

Jun 05, 2014 1:36pm BST  --  Report as abuse wrote:
Bubble trouble! Not a day goes by without yet another scaremongering report on the UK housing bubble and the inevitable armageddon following the great burst. Society as we know it will be annihilated: It will, without doubt, be the end of civilisation. Except, things never seem to work out the way we predict – terribly annoying! In fact, the markets hate nothing more than being told which direction they will take. May I take the liberty and quote Her Majesty: “Why did nobody see it coming?”, referring to the great crunch. 

As for the so-called London “property bubble”, it’s a myth. There never has been a bubble nor will there ever be one and this is why: (entry 4 May, pls scroll down)
The Bank of England should resist the media hype and refrain from “popping” a bubble that does not exist in the first place… and then “mopping” the property market in the process.

Jun 05, 2014 4:47pm BST  --  Report as abuse
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