(Updating with analyst comments)
LONDON (AFX) - UK house prices continued to rise in February but the Bank of England’s three quarter-point rate rises since August last year are starting to dent underlying sentiment, according to the UK’s biggest building society, Nationwide.
It said its house price index rose 0.7 pct in February from the previous month for a 10.2 pct annual rise, lifting the average UK house price to 174,706 stg.
The gains were larger than expected. Analysts polled by AFX News expect house prices to have risen 0.5 pct from the previous month, taking the annual rate up to 9.8 pct.
In January, there were corresponding rises of 0.3 pct and 9.3 pct respectively.
“While the three recent rate rises now seem to be starting to take their toll on the market, not all indicators are cooling just yet,” said Fionnuala Earley, Nationwide’s chief economist.
“Buyer interest and mortgage demand are waning, but the supply of properties coming onto the market remains low. This lack of supply will mean that house price inflation will remain firm for a while longer, before gradually easing,” she added.
By the second half of 2007, she predicts a much more pronounced slowdown in the annual rate of house price growth due to higher rates, stretched affordability levels and a cooling buy-to-let market.
“The move back up in house prices in February indicates that the housing market has still got considerable life left in it,” although there are tentative signs that market activity has peaked, said Howard Archer at Global Insight.
He also noted interest rates will probably rise further, which should slow average house price inflation to a rate of 6 pct this year.
However, a shortage of supply in many areas supports sellers’ pricing power, which “means house prices are likely to only gradually lose momentum”, said Archer.
sivakumar.sithraputhran@thomson.com
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