Slower increase for house prices but debt still stops first-time buyers

MONDAY, NOVEMBER 06, 2006

Nationwide figures replicate Bank of England indications that house price rises have slowed down.

However, increasing personal debt prevents first-time buyers from getting on property market, the research reveals.

Figures released by Nationwide on October 31st have shown 'firm' house price growth in the past month - despite debt problems stopping many first-time buyers from getting on the property market.

According to the bank, the average price of a house rose by 0.7 per cent in October, whereas September saw an increase of 1.3 per cent.

The three-month rate rose to 2.6 per cent, the biggest increase the bank has seen since September 2004. This caused the average price of a house to rise to £169,623 – more than £12,500 from the same time last year.

Fionnuala Earley Nationwide's group economist said: "Recent housing market indicators have been firm, and the latest approvals data from the Bank of England show that the August rise in interest rates did nothing to curb demand."

However, Ms Earley predicted property demand would eventually slow.

"Rising interest rates, worsening affordability, falling yields on housing investments and lower expectations of future house price growth are all factors that we expect will slow the market in the coming months. However, the momentum that has built up in the market means that we can still expect to see relatively strong annual rates of growth in the short-term," she said.
The news comes as first-time buyers increasingly find themselves priced out of the property market.
A Bank of England report released on October 30th showed mortgage approvals were at their highest rate in two and a half years - despite credit card borrowing across Britain rising to £365 million.

Meanwhile, Alliance & Leicester has said parents are increasingly helping their children get a foot on the property ladder and out of debt.

A report by the bank showed parents are lending an average of £18,000 to help their children make mortgage repayments and avoid debt.