Property prices continue to slow

Property prices in the UK rose by a modest 0.3% in July, according to figures from the mortgage bank Halifax.

The latest monthly report adds to the growing band of evidence that the rapid house price rises of the past two years have come to an end.

The four mortgage rate rises between last September and February 2000, and the abolition of mortgage interest tax relief in April, are the two key factors explaining the housing market slowdown

Halifax

The Halifax figures leave the cost of an average property at £84,276, 8% higher than at the same time in 1999.

However, that annual increase has fallen from the end of June, when the year-on-year price rise registered by the Halifax was 9.2%.

Halifax's report of a modest rise in July came a week after Nationwide Building Society said house prices had fallen 0.2% in July to stand 13.9% higher than a year earlier.

Over the longer term, both lenders' surveys have shown that prices have remained almost unchanged in the past four months, after sharp rises in 1999 and the first two months of 2000.

Average earnings

This means that annual house price inflation, according to the Halifax, has halved over the past six months with the current rate comparing with the 16% peak in January.

"The four mortgage rate rises between last September and February 2000, and the abolition of mortgage interest tax relief in April, are the two key factors explaining the housing market slowdown," said the Halifax.

"The economy, however, remains in good shape ... and should continue to underpin relatively strong consumer confidence."

The average property price is 3.5 times average earnings. This is above the 3.1 multiple recorded in early 1999, but below the 3.7 average for the past 16 years, according to Halifax figures.

Mortgage payments account for 23% of the gross earnings of the average first time buyer, which is in line with the average for the period since 1984.

"These factors should support a steady housing market over the remainder of the year," it said.