British house price inflation eased slightly in May

British house price inflation eased slightly in May, according to property researchers Hometrack, suggesting higher interest rates may be starting to cool demand in the housing market. Hometrack said yesterday that house prices rose 6.7 per cent on the year this month, cooling a touch from 6.8 per cent in April.

‘The steady ratcheting up of interest rates was bound to take its toll eventually,’ said Richard Donnell, director of research at Hometrack.

‘We expect the headline rate of growth to slow relatively quickly over the rest of the year towards 4 per cent as affordability pressures put a continued squeeze on purchasing power and more supply comes to the market.’ he added.

The housing market has remained robust in spite of four interest rate hikes since August, but some economists forecast that rates could rise as high as 6 per cent and significantly cool house price growth. ‘The expected slowdown will be exacerbated by any further increases in interest rates above the (current) 5.5 per cent,’ Mr Donnell said.

Source: The Business Times, 29 May 2007