U.K. house prices increased in July as record-low borrowing costs helped support demand for residential property.
Prices rose 0.3 percent from the previous month, the mortgage unit of Lloyds Banking Group Plc said in a statement in London today. From a year earlier, prices fell 2.6 percent to an average 163,981 pounds ($267,000).
The housing market is struggling to gain momentum as consumers are suffering from high inflation and government spending cuts. The Bank of England held its benchmark interest rate at a record low yesterday as the economy grew just 0.2 percent in the second quarter after stalling since September.
“Overall, there has been little change in either the level of house sales or the number of properties on the market for sale since late 2010,” Martin Ellis, a Halifax economist, said in the statement. “Sustained low interest rates and a slowly improving economy should help to support demand in the face of pressures from weak earnings growth, relatively high inflation and higher taxes.”
In the three months through July, values rose 0.5 percent from the previous quarter, Halifax said.
Consumers are getting squeezed by inflation that reached 4.2 percent in June, more than double the bank’s 2 percent target, as the government implements the biggest public spending cuts since World War II.
‘Willingness to Commit’
“The current sell-offs in financial markets and growing fears of a renewed serious global economic downturn are unlikely to do much for consumer confidence and willingness to commit to buying a house in the near term,” Howard Archer, an economist at IHS Global Insight, said in a research note.
Net mortgage lending fell by 100 million pounds in June from May, while mortgage approvals rose to 48,421 from 46,418 the previous month, Bank of England data show. Loan approvals have held between 43,000 and 50,000 since the start of 2010, compared with an average of 119,000 in 2006, when house prices peaked before the global credit squeeze.
Central-bank policy makers also held their bond-purchase program at 200 billion pounds yesterday. Minutes of the decision will be published Aug. 17.