U.K. House Prices Rise as BOE Gets Mortgages Flowing: EconomyScott Hamilton and Svenja O’Donnell
U.K. house prices rose last month to the highest in almost three years as measures by the Bank of England and the government stimulated property demand.
Home values increased 0.6 percent from the previous month to an average 167,984 pounds ($256,000), the highest since August 2010, Halifax, the mortgage unit of Lloyds Banking Group Plc said in a statement in London today. From a year earlier, prices rose 4.1 percent.
The property market is showing signs of strengthening after the BOE’s Funding for Lending Scheme helped to lower borrowing costs and the government set up a program to help people buy homes. Services, manufacturing and construction all improved in June, indicating the economic recovery is gaining momentum, and the central bank said yesterday that mortgage demand rose “significantly” in the second quarter.
“Improved confidence in both the housing market and the economy, combined with a shortage of properties available for sale, appear to be pushing up house prices,” said Martin Ellis, housing economist at Halifax. Still, a “subdued economic background and weak income growth are expected to remain significant constraints on housing demand.”
With the economy showing signs of improving, economists forecast that Bank of England policy makers will hold fire on stimulus today at Governor Mark Carney’s first monetary-policy meeting. The central bank will leave its target for quantitative easing at 375 billion pounds and the benchmark interest rate at 0.5 percent, according to two Bloomberg News surveys.
In the three months through June, house prices rose 2.1 percent from the previous quarter, according to Halifax. From a year earlier, values were 3.7 percent higher, also the biggest increase since August 2010.
Taylor Wimpey Plc, the U.K’s second-largest homebuilder by volume, said today that more than 1,000 customers reserved homes using Help to Buy and a further 232 are seeking approval. It also said that first-half operating profit margin in the U.K. was more than 13 percent, up from 11.2 percent a year earlier. Shares rose 4.8 percent as of 10:35 a.m. London time.
“The government and BOE have thrown the kitchen sink at the problem of getting bank credit flowing, and it is working in the housing market,” said Rob Wood, an economist at Berenberg Bank in London.
Data this week showed that mortgage approvals rose to the highest since 2009 in May, while a BOE survey yesterday found banks boosted home-loan availability and lowered borrowing costs in the second quarter. Lenders also signaled they may increase the supply of higher loan-to-value mortgages.
Halifax isn’t the only company reporting higher house prices. Hometrack Ltd. said prices rose 0.4 percent in June, while Nationwide Building Society said last week that property values rose 0.3 percent last month.
Also today, the European Central Bank will hold its key interest rate at 0.5 percent, according to 61 of 62 economists in a Bloomberg survey. Morgan Stanley is the only institution predicting a reduction, by a quarter point. The bank will announce the decision at 1:45 p.m. in Frankfurt and President Mario Draghi will hold a press conference 45 minutes later.
U.S. equity markets are closed today for the July 4 holiday.