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(EMAILWIRE.COM, June 05, 2009 ) UK - The sharpest monthly increase in UK house prices in seven years was felt last month, with prices rising by £131 a day – TheMoveChannel checks out whether this, coupled with signs that consumer confidence is picking up, is an indication that the market is on the mend…
In the biggest increase recorded by the Halifax in seven years, house prices in May jumped by 2.6 per cent, which cut the annual drop in prices to 16.3 per cent.
It is the biggest one month jump since late 2002 and sees average prices on completion increasing to £158,565.
This has led the building the building society to say that there are now ‘tentative signs’ of a housing market stabilization, but they warned consumers not to get too carried away.
Halifax Housing Economist Nitesh Patel said, “Historically, house prices have not moved in the same direction month after month even during a pronounced downturn.
“For example, prices fell by 11 per cent nationally during 1991 and 1992, but there were five monthly price rises in this period,” he added.
However, Nationwide also recently reported an increase in May, although at the slightly lower level of 1.2 per cent and a new report claimed BritainÂ’s services sector is already out of recession.
The Chartered Institute of Purchasing and SupplyÂ’s services survey showed an activity index reading of 51.7 in May - the first time the beleaguered sector has pulled into positive territory since April last year. A score above 50 indicates growth.
The Society of Motor Manufacturers and Traders said there were ‘encouraging’ signs that their ‘cash for bangers’ scrappage scheme – which gives customers a £2000 grant if they trade in their old vehicles - was beginning to boost confidence.
Howard Archer, Chief Economist at Global Insight said, “All this is bound to heighten speculation that the housing market is turning.”
The mortgage market may also be showing signs of life - according to the Intermediary Mortgages Lenders Association (IMLA), brokers have identified a number of tentative early signs that the mortgage market is beginning to bounce back.
As well as predicting a rise in first time buyers entering the market over the next 18 months, consumer confidence overall is also picking up.
Head of Mortgage Policy at the Building Societies Association Paul Broadhead pointed out that the number of building society mortgage approvals increased by 14 per cent between March and April 2009.
But, despite all of this positive news, economists are however still predicting house prices to fall on an annual basis until summer next year.
Base rate bonanza
The Bank of England decided to keep interest rates on hold at 0.50 per cent again today, meaning that the cost of borrowing has been left unchanged for the third consecutive month.
Considering that interest rates cannot really go any lower, the Bank continues to focus on quantitative easing. Base rates are now expected to remain at historically low levels until 2010 at the earliest, with a rise to coincide with strengthening demand growth.
James Thomas, Head of Residential Development and Investment at Jones Lang LaSalle, said, “There are tentative signs that the pace of decline in house prices is beginning to moderate.
“The three-month Libor rate, on which most mortgages are based, has fallen from 1.45 per cent at the beginning of May to 1.28 per cent now.
“The fall suggests that liquidity is starting to come back to the money markets which will hopefully feed through to mortgages.
“However, it is still too early to suggest that the housing market has bottomed out. Mortgage approvals are still down - the latest statistics from the Council of Mortgage Lenders show that total mortgage lending fell to £10.4 billion in April from £11.4 billion in March.
“Furthermore, rapidly rising unemployment and limited access to credit continue to weigh on the housing market,” he added.
For more information on UK properties and the property market in general, please visit http://www.themovechannel.co.uk/
-ENDS-
Notes to editors:
TheMoveChannel.com is a property website that was founded in 1999 as an online resource for buying, selling and learning about property. It now receives as many as 300,000 visits per month and advertises over 50,000 properties in nearly 90 countries, which are listed by over 500 partner organisations.
For further information, please contact:
Dan Johnson
Managing Director
www.themovechannel.com
0207 952 7650
TheMoveChannel.com
Dan Johnson
020 7952 7650
dj@themovechannel.com 
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