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Rates held for UK mortgages - 8 June 2007

Following last month’s anticipated rise in interest rates, the Bank of England has decided this month to hold rates at the 5.5 per cent level for a further month. However, the vast majority of analysts expect there to be at least one further rise this year as the housing market shows no signs of slowing its rapid growth.

At the same time, seemingly conflicting reports have emerged concerning the state of the UK property market and how it will be shaped for the future. Mortgage lender Halifax has recorded a second successive month of slower growth in the price of homes in the UK, with prices rising by just 0.3 per cent in May.

The Times newspaper reported yesterday on a study released by a new think-tank, the National Housing and Planning Advice Unit (NHPAU). The report suggests that house prices in the UK could reach ten times the national salary rate by the year 2026. The figure currently stands at around seven times salary levels.

Taking into account the lowest 25 per cent of earners and the lowest 25 per cent of properties, the NHPAU said that the figure depended on the number of properties built each year in the intervening period. Should national housebuilding targets not be met, undersupply will cause prices to rise more quickly and the ten-times-salary threshold will be breached sooner.

This week also saw the European Central Bank raise its own base rate of interest to four per cent, as well as revising inflation predictions for 2007 upwards.

 


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