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Interest rates bite house prices

23/07/2007

Five interest rate rises in the last 12 months are beginning to rein in house prices, the latest research has said.

According to Rightmove house prices rose 0.3 per cent in July, 0.5 points behind the growth experienced in June.

The online property firm says that this is the lowest monthly rise its survey had recorded this year and contributed to annual house price inflation of 10.3 per cent.

In June, house prices were revealed to have risen 13.2 per cent over the previous 12 months.

Since August 2006 the Bank of England has raised interest rates five times, the latest quarter point increase coming earlier this month.

The Bank's monetary policy committee (MPC) has been winning its war on inflation and consumer spending, but the UK's buoyant property market had proved to be a stubborn opponent.

Rightmove's commercial director Miles Shipside however predicts that the market's "mini-boom is coming to an end".

"As long as employment remains buoyant, prices are likely to remain broadly at these levels," he commented.

"However, depending on local supply and demand, sellers are going to have to duck and weave with their asking prices, especially if there is another rise in interest rates. This may be less likely now as there do seem to be further 'indicators suggesting a softening in the housing market' as referred to in the MPC's latest minutes."

Today's survey, based on the measurement of 186,597 asking prices, also shows that the price-divide between London and the rest of the country is showing no sign of letting up, with the capital's houses recording an annual increase of 27.1 per cent in July.

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