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Last Updated: Tuesday, 29 June, 2004, 12:11 GMT 13:11 UK
Q&A: Have house prices peaked?
Semi-detached houses
Is the market heading for a crash?

UK house price growth is easing according to recent surveys from the Halifax bank and Nationwide building society.

BBC News Online examines whether the market has reached a turning point.

Do these figures mean the boom is over?

House prices are still growing well above the rate of inflation.

However, The Halifax survey's figures suggest that the rate of that growth is now slowing down.

And it and other major lenders have predicted that the slowdown in house price inflation will continue for the rest of 2004 in a "soft landing".

Under this scenario, the UK housing market will move seamlessly from its current state of double digit price growth to a rate of increase more in keeping with the economy as a whole.

They argue that the runaway housing market in the north and west will soon mirror that in the south and east, which has seen only modest price growth in the past year.

Hasn't the idea of a "soft landing" been widely-touted before?

There has been an ongoing debate between experts over the steepness and speed of any forthcoming fall in house prices.

Some economists have been predicting the end of house price inflation for several years, yet the market has continued to grow apace.

Although some buyers have been forced out of the market by high prices, there have been enough buyers to keep the market buoyant.

Most recently, numbers of first-time buyers fell to record low levels. But they have been replaced by buy-to-let investors who see property as an alternative to a pension or shares.

The banks, building societies, and those taking care of the UK economy, are hoping for - and in some cases trying to engineer - a soft landing.

Economists agree that a crash in house prices is one of the biggest risks facing the UK economy.

And lenders have as much to lose as individual homeowners from a sharp fall in house prices.

Some mortgage firms have radically loosened their lending policies in recent years, helping fuel the house price boom.

As well as those expecting a soft landing, a number of institutions and economists are also predicting heavy falls of about 30% over several years.

My son borrowed many times his salary to buy his first property. Should he worry about a price crash?

If your son took out a variable rate mortgage he will already be feeling the pain of four interest rate rises since November.

The Bank of England Monetary Policy Committee (MPC) is supposed to set UK interest rates purely to counter inflationary risks.

However, recent comments from the bank's governor Mervyn King have highlighted how seriously the MPC takes the runaway housing market.

Most economists would agree that interest rates, currently at 4.5%, are very unlikely to reach the levels of the early nineties that prompted a market crash and hundreds of thousands of repossessions.

As a result, proponents of a soft landing point to a combination of low inflation, high employment and mortgage repayments taking up only a small percentage of the average take home pay.

However, some economists point out that many buy-to-let investors have remortgaged their main home in order to invest in property.

As a result, some buy-to-let investors are doubly exposed to any fall in house prices.

If they start to feel the pinch then they could choose to offload their properties which in turn may precipitate a general fall in house prices.

Are there any sure signs that house prices may have reached their peak?

No.

The array of house price surveys can be bewildering.

They all seem to measure different periods of time, using varied methodology.

However, the trend of the most recent housing market surveys has pointed in one direction: continuing rises in house prices, but a slowdown in the pace of that growth.

In addition, the latest lending figures from the Bank of England has indicated that mortgage lending is slowing.

According to the Bank of England, secured lending rose by 8.6bn in May, down from a gain of 9.4bn in April, indicating recent interest rate rises might be having an effect.

But, on the flip side, the number of new mortgage approvals rose by 3,000 between April and May.




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