The timing of the first interest rate rise since 2009 could be further delayed by house prices.
Prices are growing at their slowest annual pace for two years, lender Nationwide said today, giving the Bank of England another reason to delay an interest rate hike.
The Bank’s monetary policy committee is pondering the timing of the first rise against the backdrop of wildly swinging financial markets and virtually zero inflation.
Today’s data from the Nationwide showed a 0.3 per cent rise in prices during August but the annual rate of growth slowing to 3.2 per cent, the lowest since June 2013. Financial markets have pushed back their expectations for the first rate rise from February next year to May in response to the turmoil emanating from fears over Chinese growth.
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After double-digit rises in recent years, fuelled by factors such as the Government's Help to Buy scheme, Nationwide’s chief economist Robert Gardner said there were signs house prices growth was falling into step with earnings.
But he warned the UK needed to step up the pace of building to keep prices in check. "With UK housebuilding running well below the expected rate of household formation in recent years and with demand for homes rising, a significant increase in construction activity is required if affordability is not to become stretched in the years ahead."
