Following a robust economic growth, British housing sector indicated a slow downing in January. According to Nationwide British house prices rose by 0.3 percent to mark slowest growth rate in past eight months. The latest figure reveals that the moderate rise reduced the annual rate of house price inflation to 9.3 percent against 10.5 percent in December.
In reaction to the latest development the building society has said that the market is showing first sings of slowing down in the wake of latest interest rate rises. Experts are of the view that there may be weakening demand in the housing sector as a result of stretched affordability and rising interest rate.
The Bank of England had raised the interest rate to 5.25 percent from 5 percent earlier this month. However, the financial market was stunned with this unexpected rise of the interest rate as the market was of the view that the interest rate will stay at 5 percent for a while following a strong economic growth.
On the other hand, the bank was sensing that the growth has triggered a threat of inflation and then it decoded raise rates to keep a tap on inflation. The bank had also made it clear that if the economy continues to mark strong growth there might be chances of another hike to ward off inflation risks.
However, even in the present circumstances, few experts are of the view that British property market will stay buoyant this year. The have argued that a shortage of new houses and big pay packages to City workers are the strong factors to keep this sector upbeat.
Nationwide concluded that the main threat to prices was an unexpected drop in confidence due to the recent interest rate rises. Following the development, now experts are speculating the house price growth somewhere between 5 to 8 percent for the year 2007.
