House price inflation slows in July

The Nationwide Building Society has published data showing that in July 2007 house prices rose by their smallest amount in more than a year.

The 0.1% increase during the month, which is the lowest since April 2006, takes the annual house price inflation rate down to 9.9%.

The increase fell short of analysts’ predictions of a 0.5% rise on the month, which would have produced an annual rate of 10.6%. In June, house price inflation stood at 1.1%, giving an annual rate of 11.1%.

In terms of cash the July rise means that the average cost of a home in the UK is £184,270, a £16,537 increase on the July 2006 figure.

Whilst the Bank of England’s base rate is currently 5.75%, some mortgage lenders are pricing in one more increase for 2007, taking it to 6%.

Certainly the July rise would imply that the five interest rate rises in less than a year are having the desired effect on the market.

This could forestall a much predicted August increase in the base rate to 6% but economist hold a wide range of views on the subject and the Bank of England’s governor spoke only this week on the dangers of gradualism when dealing with inflation.

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