Good time for homeowners?

Nationwide reported today that prices rose by 3.9% in the past year.  The rise in July was 0.8%. This differs somewhat from the Daily Mail's claim that prices only rose 0.3% in July.

Inflation has risen by 2.9% in the year till  June so prices are rising a bit quicker than inflation, but we are still some way away from a boom. And adjusted for inflation prices are still below their peak.

However rising house prices will increase the equity of most homeowners, this is because they will have a mortgage that does not adjust in line with inflation. For someone with a £150,000 house the increase will have increased their equity by approximately £5,850. There is probably a greater expectation that interest rates will remain low for the foreseeable future.

It is hard to see much changing in the near term, government is keen to stoke up demanding for housing on one hand. On the other hand affordability is an issue and so prices are unlikely to accelerate. Homeowners are probably happy as low interest rates make a mortgage not much more expensive than renting. This means that weak demand and few transactions are likely to continue for the foreseeable future.