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House prices continue to rise


House prices are continuing to increase throughout the country, according to the UK’s largest mortgage lender, the Halifax.

When measured on an annual basis, prices had increased by 8.8% in June, in comparison to 8.7% in May, taking the average house price in the UK to £183,462.

Additionally, the Nationwide Building Society recently released similar figures that claimed prices were now higher than the market peak in 2007.

However, there were signals that suggested house prices are finally starting to moderate, as there was a month on month fall in prices between May and June – the fourth monthly fall since last December.

Speaking about the figures, Stephen Noakes, mortgage director at the Halifax said: "Housing demand continues to be supported by an economic recovery that is gathering pace, with employment levels growing and rising consumer confidence, although real earnings growth remains sluggish."

Housing bubble

As house prices have continued to increase rapidly, especially within London, some commentators have warned that a potential housing bubble could be detrimental to the wider economy.

These warnings have led to the Bank of England’s Financial Policy Committee (FPC) taking action to cool the housing market.
The FPC decided that in order to ensure banks and homeowners are not saddled with crippling debts, measures would need to be taken to protect both homeowners and banks.

These measures included a financial ‘stress test’ on borrower’s finances, where a potential homeowner would have to prove they could still afford their mortgage repayments if there was a 3% rise in interest rates.

Additionally, banks were told that they would have to limit the amount of risky loans they approve, so that only 15% of their mortgage customers are able
to lend over 4.5 times their annual income.

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