The UK Building Society, Nationwide released their monthly House Price Index in May, showing that prices continued to edge higher. In May prices grew by 0.7% and were up by 11.3% compared with May 2013. The average home in the UK now costs £186,512.
House prices and Sterling
House prices have become a contentious factor and the potential caveat for increasing base interest rates from the record low of 0.50%. The growth in property prices has fuelled concerns from analysts and some economists that there is a property bubble forming, with borrows overstretching themselves, storing up a future crisis. When interest rates do rise, many borrowers will feel the effect of larger monthly mortgage repayments, reducing the amount of spending in the economy which could stifle the recovery. The impact of the help to buy scheme seems to have had minimal impact in the overall trend of price growth.
Traders had been betting that the Bank of England would be forced to raise interest rates sooner than predicted to curb excessive price rises, especially in the capital with YoY increases +20%.