LONDON: Britain’s housing market has shown some improvement in May, but further interest rate increases by the Bank of England (BoE) are expected to put more pressure on demand and on prices in the coming months, an industry survey shows.
The Royal Institution of Chartered Surveyors’ (RICS) measure of new buyer enquiries rose to a net balance of -18, the least negative figure since -14 in May 2022 and up from -34 in April.
A gauge of agreed sales rose to -7 in May, up from April’s -18.
RICS’ house price balance, which measures the difference between the percentage of surveyors seeing rises and falls in house prices, increased to -30 last month from -39 in April.
A Reuters poll of analysts had pointed to a reading of -38.
However, analysts are forecasting another slowdown for the housing market with markets largely expecting the BoE’s bank rate to peak at 5.5% later this year, up from 4.5% now.
“It seems storm clouds are gathered, with the UK’s stubbornly high inflation likely undermining the recent improvement in activity,” Tarrant Parsons, senior economist at RICS, said.
“Britain’s housing market staged a recovery earlier this year after former prime minister Liz Truss’ ‘mini-budget’ caused turmoil in financial markets in September and sent the cost of fixed mortgage rates sharply higher to above 6%.
“But there have been signs of a fresh loss of momentum in the market recently.”
Britain’s biggest mortgage lender, Halifax, on Wednesday said house prices dropped by 1% year-on-year in May, the first annual decline since 2012. Rival Nationwide last week reported a 3.4% annual fall in prices, the largest since 2009.
The BoE, which has raised borrowing costs 12 times in a row since late 2021, is expected to increase bank rate again to 4.75% on June 22 in an effort to bring inflation – which was a higher-than-expected 8.7% in April – back to its 2% target.
Some mortgage lenders, including Halifax and Nationwide Building Society, have ramped up their fixed mortgage rates in response to the rise in borrowing costs in financial markets. — Reuters