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Last Updated: Monday, 21 June, 2004, 11:16 GMT 12:16 UK
Interest rates 'hit house prices'
People looking in an estate agent's window
The property market may have turned, Rightmove says
House prices fell during the second week of June, according to property website Rightmove.

Rightmove said the price of the average house fell by 0.4%, during the week as recent rises in interest rates started to take effect.

Nevertheless, the group revealed that during the five weeks to 12 June prices rose by 2.6%, while the annual rate of increase jumped from 15.6% to 17.2%.

The average house in England and Wales now costs 193,965, Rightmove said.

Rate moves

"Over the month, prices are up again, but close analysis provides evidence that the market may have turned," Miles Shipside, commercial director of Rightmove, said.

"The impact of four interest rate rises - including two on the bounce in April and May - is beginning to bite.

House price prediction
2004 prices to rise by 15.4%
2005 prices to rise by 3.5%
2006 prices to fall by 1.5%
2007 prices to fall by 2.3%
Source: Centre for Economics & Business Research

"Right up till the end of May the boom continued unabated but, come June, the market seems to have turned and we've seen the first price falls since the usual seasonal slowdown last Christmas," Mr Shipside added.

The Bank of England's Monetary Policy Committee has raised interest rates four times since the start of November in a bid to keep a lid on inflation and encourage restraint amongst borrowers.

Recent house price surveys from the main mortgage lenders - the Halifax and Nationwide - have indicated that the market is still rising rapidly.

However, there were signs last week that higher borrowing costs are beginning to have an impact, with figures from both the British Bankers' Association and the Council of Mortgage showing that mortgage lending slowed in May.

Rightmove said it looked as though the slowdown was starting in London and spreading outwards, with prices in the South East falling 0.7% during the second week of June.


Falls were also recorded in Wales, where prices dipped by 1.3%, with smaller drops in the North West and West Midlands.

However, over the five weeks as a whole, prices rose again in all regions, with Wales leading the way with a 6.2% gain, followed by the North West at 4.3% and the North at 4.2%.

Rightmove cautioned that the slowdown was not unusual for this time of year, and could reflect one-off factors such as would-be buyers calling off their search to enjoy good weather, or even the Euro 2004 football championship.

Rightmove collates asking prices for houses placed on its own website.

Its figures do not take account of the price houses end up being sold for.

The sample size is extensive, as Rightmove claims to display around 35% of all homes for sale.

'Soft landing'

Separately, London-based think-tank the Centre for Economics and Business Research (CEBR) suggested the UK housing market was heading for a soft landing rather than a price crash over the next few years.

The CEBR said house price inflation would fall to 3.5% in 2005, with a small price decrease predicted for 2006 and 2005.

As a result, the average home would be worth less by 2007 than it is today, the CEBR said.

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