The boom in UK house prices seems set to continue with prices rising by a record 4.7% in October to ...
The boom in UK house prices seems set to continue with prices rising by a record 4.7% in October to reach a 30.6price increase over the year, according to the latest figures released by the UK's largest mortgage lender, Halifax.
Halifax's Chief Economist Martin Ellis attributes the record rise in October to the low level of interest rates and falling unemployment. According to Ellis, affordability remains robust with mortgage repayments representing 15% of gross earnings for a typical new mortgage borrower which is one of the lowest percentages since 1984 and significantly below the long run average of 22%.
Although high housing prices will constrain demand for first time buyers, the low level mortgage repayments in relation to earnings means new borrowers are not 'over-stretching' themselves.
But Ellis cautions that these figures are skewed by the fact that house prices slumped temporarily following the September 11 terrorist attacks. "The economic impact of 11th September accounted for nearly two-thirds of the 6.4 percentage points increase in the annual rate of house price inflation from 24.2% in September 2002 to 30.6% in October 2002."
Halifax's figures also show evidence of 'ripple effects' within regions as property value hunters look for better value outside the main hotspots, driving up prices in areas such as Loughton in Essex, Smethwick in the West Midlands and St Leonards-on-Sea in East Sussex.
According to Ellis house prices continue to increase in mainstream markets like London and the South East, but the biggest rises in October occurred mainly in the North, Yorkshire and the Humber and the South West.
With little prospect of either a substantial rise in interest rates or unemployment next year, Ellis forecasts a continual increase in prices but at a slower pace than in recent months.
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