Housing demand in the UK is starting to soften.

A lack of supply of homes for sale and new housing stock development will continue to support prices, Nationwide says recent rises in UK mortgage interest rates are beginning to have an impact on homebuyers, the Nationwide has said. But the building society's housing survey still showed prices up by 0.7% in February, lifting annual price growth to 10.2% from 9.3% in January.
Nationwide said interest among buyers and demand for mortgages was beginning to wane following the rate increases.
Even so, it said price inflation would remain firm for a while, because of a lack of supply of properties for sale.
Nationwide said the average price of a UK property now stood at £174,706.
"Not all indicators are cooling just yet," said the Nationwide's chief economist, Fionnuala Earley.
"For now, supply issues are keeping an upward pressure on prices as property sales have continued to rise, while the number of properties placed on the market has been falling," she added.
Cooling off?
The building society points to a recent dip in new mortgage approvals, and enquiries from would-be buyers at estate agents, as evidence that the market may be about to cool off in the wake of the Bank of England's three recent increases in interest rates.

On Tuesday, the British Bankers' Association reported that its members, who account for about half of current mortgage lending, had seen a small fall in new mortgages approved for home buyers in January, compared with the same month last year.
However, the Nationwide points out that the buy-to-let market is also keeping the wider property market buoyant.
Ms Earley admitted it might be some time before the annual rate of house price inflation started to subside.
"The annual rate of house price growth will remain close to 10% until late spring. By the second half of 2007, we continue to expect to see a more pronounced slowdown," she said.

New Housing starts fall and push up house costs

The number of new dwellings built in Australia fell at the end of last year, which would work to keep housing unaffordable, analysts say.
Dwelling commencements in the December quarter fell 0.8 per cent to 37,413 units, seasonally adjusted, from a downwardly revised 37,726 units in the September quarter, the Australian Bureau of Statistics said today. The median market estimate was for a fall of 3 per cent in the December quarter.
In the year to December 2006, total dwelling commencements rose 5.5 per cent, seasonally adjusted.
Housing Industry Association executive director of housing and economics Simon Tennent said the decline in dwelling commencements was not surprising.
"The industry is continuing to face all sorts of pressures from high land costs and a lack of interest from the market in general," he said.
"Approvals are taking longer and longer to get to commencement stage."
The housing industry would not recover until late in 2007 or early next year, Mr Tennent said.
He said the industry needed to build 40,000 homes in the quarter to cater for population growth.
"It continues to show the industry is building less," Mr Tennent said.
"The pressure on housing affordability and the rental market is not going to go away until we build 40,000 homes per quarter."
UBS chief economist Scott Haslem said the numbers suggested a recovery in the housing sector was still some way off.
"It's out there we just don't know when," Mr Haslem said.
"The figures are consistent with the weak building approvals we've seen. They paint a picture of a housing sector that's stuck in the mire."
Source: AAP

Mortgage interest rates are forecast to keep rising

How things change in the mortgage rate speculation!
A key analyst is now predicting interest rates will rise in the first week of April and again within 12 months, which would hit hard Australians on lower incomes.
“On balance it now looks likely that the Bank will raise rates by 0.25 basis points following its April 3 Board meeting,” said Westpac Bank’s chief economist Bill Evans today in a research note. Any decision would be announced to the public on April 4.
The central bank raised interest rates three times last year, with November’s rate rise of 25 basis points taking official interest rates to a 6-year high.
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According to Mr Evans, the pain to households will continue into next year and rates would rise even more.
“A rise in interest rates in April or May would not mark the peak of the cycle. We expect that the Bank would be prepared to go on hold for the remainder of 2007 to assess the cumulative impact of four rate hikes over a full year.
“However, we expect that the factors pushing up inflation over the last year would remain apparent through the second half of 2007 leading to a further move by early 2008.”
Recent economic data suggests wages growth remains robust and economic growth remains “relatively growth”.
The RBA sets interest rates to keep inflation between 2 and 3 per cent and strong economic growth pressures inflation higher.
The Aussie dollar has surged over US80 cents and bond yields have gone up in expectation of another rate rise. The Australian bank bill futures market yesterday put the chance of a rate rise at the next Reserve Bank board meeting at 50 per cent, while a rate hike in the next 12 months is considered a certainty.
People on lower incomes and Australians up to their ears in debt would be hurt particularly by another rate rise.
Bank repossessions of properties are rising around Australia, especially in lower income areas such as Sydney's and Melbourne's outer suburbs.
Property investors who also bought at the peak of the boom of 2003 have also been stung by higher interest rates and some home owners are now in a position where their mortgage is worth more than their home, or they hold "negative equity".
Source: NEWS.com.au

Mortgage interest rates unlikely to rise

Australian home loan mortgage rates are believed to remain untouched when the Reserve Bank of Australia's board meets this morning.
The Reserve Bank of Australia (RBA) increased interest rates three times last year in a bid to rein in inflation.
The official cash rate currently stands at 6.25 per cent.
The central bank has already met once this year and decided to keep interest rates on hold.
TD Securities chief strategist Stephen Koukoulas says while inflation is still higher than the Reserve Bank would like, it is unlikely to raise rates.
"The RBA is waiting to see if the rate hikes of 2006 cool the economy down," Mr Koukoulas said.
"It's too early to be sure that that's the case but they can afford to wait another month."
He says the conflicting news of too high inflation and low economic activity almost guarantees a decision to hold rates.
The RBA will announce its decision tomorrow morning should a change in interest rates occur. If interest rates remain the same then there is usually no announcement.
Source: ABC