The latest house prices index from the Halifax shows a month-on-month increase of 0.3% in July as record low interest rates helped support demand from residential property seekers.
The mortgage branch of Lloyds Banking Group Plc reported last week that house prices last month reached an average of £163,981. Although this was an increase on June’s figure, prices still remain 2.6% down compared to this time last year.
The housing market is still struggling as consumers suffer high inflation and government austerity measures. The economy grew by a mere 0.2% in Q2 leading to the Bank of England holding the base rate at 0.5% last week.
Martin Ellis, an economist from Halifax, said the number of properties for sale, and the level of sales, has remained virtually unchanged since late 2010. Inflation was 4.2% in June and higher taxes and low wage increases are seriously depleting household budgets. On the plus side, the slowly improving economy, coupled with low interest rates, will ensure there is a certain level of demand.
Howard Archer from IHS Global Insight does not expect things to improve dramatically in the foreseeable future. He said that growing fears of a double dip global recession will not encourage contractor mortgage holders to commit to buying a new home.
Although the number of mortgage approvals increased to 48,421 in June, net mortgage lending dropped by £100 million, data from the Bank of England shows. At the height of the housing boom, the average monthly rate of approvals was 119,000.
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