Nationwide: Strong 1.1% growth for June

Thursday, 28 June 2007 12:00 AM

There was a strong rise in house prices in June of 1.1 per cent, research out today shows.

The Nationwide house price index for June finds the average UK house price is £184,070, up from £181,584 in May.

House prices are up 11.1 per cent since June 2006, the survey finds.

However, Nationwide is still predicting a slowdown in the second half of the year, with annual inflation dropping to between five and eight per cent by December.

"While June's heavy rain dampened the first days of Wimbledon, it did little to check the vigour of the housing market as house price inflation bounced back during the month," commented Fionnuala Earley, Nationwide chief economist.

"House prices increased by a stronger than expected 1.1 per cent in June - the fastest monthly increase in 2007."

Commenting on the prospect of further interested rates rises, Ms Earley said: "While we expected interest rates to increase to 5.75 per cent in August, this news, together with the revelation that rates remained on hold by only the narrowest of margins in June, will set the stage for that rate rise to move forward to July and for the risk of a rise to six per cent to increase significantly."

She concluded: "In spite of the bounce in June's data we still believe that the underlying trend in house price growth is softening. House purchase approvals fell back to 107,000 in April, their lowest level for a year, and while there may be a small rebound in May other data at the very start of the chain suggests that the trend is down.

"Estate agents are continuing to show a fall in the number of new buyer enquiries and house builders are also registering falls in the numbers of site visitors.

"Furthermore, in the rental market, yields for new entrants to the buy-to-let market are being squeezed significantly. This will slow the growth of this sector and also take some pressure off house price growth."

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