UK’s Mortgage lender, Halifax in their latest house price index data showed a weak housing market with the index dropping 0.6% in July. Halifax commented that the latest declines in the housing index is quite a substantial drop than what was estimated. It is forecasted that there will be little changes to none in the prices for the remainder of the this year provided the UK economy does not decline further.
UK’s housing prices are now close to the levels seen during the summer of 2009. However, on a nationa level, the housing prices have been stable over the past year which is attributed to the static nature of the supply and demand conditions during these periods. If the gap between the supply and demand widens, UK house prices will likely drop even further into autumn.
Last week, Nationwide building society, in its survey showed declines in July’s house prices by 0.7%. Overall, the value of the British homes have seen a drop of close to 2.6% within the year with average home prices in July worth £164,389. The drop in the housing markets was also further confirmed by the drop in the UK mortgage approvals, which saw declines of 13% between the periods of May/June, in what is learnt to be the lowest since December of 2010.
Lloyds Banking Group PLC, in a statement today from its mortgage unit commented that the values of the home prices dropped by 0.6% from the previous month’s gains of 0.8%.
Given the weak housing markets in the UK, a lot is riding on the BoE’s Funding for Lending scheme, which is seen as a tool to boost the housing markets in the UK which is clearly under pressure. With banks limiting access to credit and home loans on account of the deepening recession, it is clearly detering prospective home buyers, especially those with smaller deposits to get a home loan approved.
The BoE left the bank rates steady at 0.5% and its asset purchase program at £375 billion during last week’s BoE Press conference, as policy makers begin their assesment of the Funding for lending scheme in order to loosen the flow of credit.
The new economic forecasts from BoE policy makers would be published on the 8th of August at the BoE Press release with expectations that the BoE could cut its projections on growth and inflation.