UK Nationwide House Prices Rise For a 12th Month

27 February 2007 - Source: www.bloomberg.com

The average cost of a home gained a seasonally adjusted 0.7 percent to 174,706 pounds ($344,000) from January, when they rose 0.3 percent, Britain's third-biggest mortgage lender said today. Prices increased 10.2 percent from a year ago.

The Bank of England predicts higher prices of assets such as housing will encourage growth in consumer spending, which more than doubled in the fourth quarter. Today's report and data from rival home-loan bank HBOS Plc suggest that a shortage of homes is driving increases in U.K. property values.

"Supply issues are keeping an upward pressure on prices,"Fionnuala Earley, group economist at Swindon, England-based Nationwide, said in a statement. "House-price inflation will remain firm for a while longer."

Interest-rate futures show traders expect the central bank to raise interest rates a quarter point from the current level of 5.25 percent, a five-year high. The implied rate on the March contract was 5.56 percent at 11.04 a.m. in London, and on the June contract was 5.67 percent.

The contract settles to the three-month London interbank offered rate for the pound, which averaged about 15 basis points more than the central bank benchmark for the past decade. A basis point is 0.01 percentage point.

Hometrack, HBOS

London-based research group Hometrack Plc. said Feb. 26 that U.K. house-price inflation reached the fastest pace in more than three years this month, driven by a shortage of homes. Prices rebounded in January, rising 1.3 percent on the month, HBOS said Feb. 8. The bank will release its report for February next week.

A separate report today by the U.K. Land Registry, a government agency which records all property transactions in England and Wales, showed house prices increased 0.9 percent in January to an average of 174,827 pounds ($342,000).

Consumer spending rose 1 percent in the fourth quarter as house prices surged, fueling economic expansion at a 3 percent annual pace, the fastest in the U.K. since 2004. The central bank expects growth to accelerate further in 2007.

Mortgage approvals, which fell to an eight-month low of 113,000 in December, suggest house-price gains may slow as higher interest rates cool demand, Nationwide‘s Earley said.

 

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