House prices have increased 8.8 per cent in the 12 months to June, however they dipped by 0.6 per cent in the month, Halifax’s monthly house price index has revealed.
Halifax said the price drop came after home sales edged down by 3 per cent in May to less than 100,000 for the first time in six months; however, transactions were still 15 per cent higher than in May 2013.
Monthly movements, however, can be volatile, Halifax warned, and the quarter on quarter change is a more reliable indicator of the underlying trend.
In the three months to June, house prices were 2.3 per cent higher than in the previous quarter.
Stephen Noakes, mortgages director at Halifax, said: “Housing demand continues to be supported by an economic recovery that is gathering pace, with employment levels growing and rising consumer confidence, although real earnings growth remains sluggish.”
The movement in house prices came as Mark Carney, governor of the Bank of England, implied that rates could rise by the end of 2014.
Last week, the Financial Conduct Authority revealed it is set to publish “general guidance” to firms to fulfil recommendations from the Bank of England to introduce mortgage income multiple caps to cool the housing market.
The Financial Policy Committee published a report which recommends regulators ensure mortgage lenders limit the amount of their customers that are able to take out a mortgage at more than 4.5 times their income.
In a highly anticipated move, it recommended that no more than 15 per cent of a lender’s book can account for such high loan-to-income multiples.
The FCA said that following the FPC’s recommendations, it will consult on general guidance which will provide details on how it proposes to follow the loan to income ratios.
Mark Harris, chief executive of mortgage broker SPF Private Clients, added: “As more property comes up for sale, with vendors worrying that they may have missed the boat, the heat has come out of the housing market.
“The threat of an interest rate rise is there in the background, influencing people’s willingness to take on more debt.
“Fixed-rate mortgages are still cheap however, although they are edging up slightly. The mortgage market review is having an impact and slowing things down although we expect this to be temporary as lenders get to grips with the new regime.”
