LONDON (AFX) - A raft of surveys this morning indicate that UK house prices
are set to appreciate further over the summer months despite some recent
evidence suggesting that they were coming off the boil.
According to the British Bankers' Association, which covers around 65 pct of
the market, mortgage lending rose by its highest amount in just over two years
during May. It said net mortgage lending rose by an underlying 5.7 bln stg from
the previous month. That's higher than the 5.1 bln recorded in April and the 5.1
bln plus average over the previous six months.
Meanwhile, the Council of Mortgage Lenders reported that gross mortgage
lending during the month totalled 28.7 bln stg. That was 18 pct up on April's
and nearly 30 pct higher than in May last year. It was also the strongest May
figure on record and only 0.5 pct below the 28.9 bln stg record in July 2004.
And the Building Societies Association said the UK's building societies lent
more money in May than they have ever done during the month. Gross advances
stood at 4.6 bln stg, up on the 3.5 bln in the same month last year.
"Very robust mortgage lending and approvals in May indicate that reports of
the death of the 'mini boom' in the housing market are premature," said Howard
Archer, chief UK economist at Global Insight.
"This suggests that house prices will see further strength in the near term
at least after showing recent tentative signs of coming off the boil," he added.
Longer term, most observers think house price inflation, which currently
stands at an annual rate of around 5 pct, is likely to moderate, especially if
the Bank of England raises borrowing costs in the months to come, as anticipated
by sterling markets.
Analysts said today's data is unlikely to alter market expectations that the
BoE will raise borrowing costs some time this year. However, they did say
policy-makers will be interested to see consumers' renewed appetite for debt,
which had previously been perceived as a major risk.
"In our view, household appetite for credit provides a near term risk of
higher interest rates but also introduces a medium term downside risk to GDP,"
said John Butler, economist at HSBC.
Attention will now shift to tomorrow's publication of the minutes to the
last rate-setting meeting of the MPC.
Though most analysts expect the MPC to have voted 7-1 in favour of keeping
the key repo rate unchanged at 4.50 pct for the tenth month running, they
anticipate the commentary to be slightly more hawkish.
pan.pylas@afxnews.com
pp/joy
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