UK house prices are going to keep going up – Standard and Poor’s
The UK's rapid house price growth will not end anytime soon, a major ratings agency said today.
"Conditions for ongoing robust gains of UK residential property prices remain intact," Standard and Poor's said in a new report.
Low mortgage rates and record high employment are fuelling demand, the report said. It added that "the search for yields in a low interest rate environment has boosted the now sizable buy-to-let market".
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After an estimated increase of seven per cent last year, S&P expects prices across the UK to climb a further five per cent this year and three per cent in 2017.
"Mortgage rates which are tightly linked to the Bank of England's (BoE) policy rate are now likely to stay lower for longer than initially expected," the report said.
"While conditions for a first hike may gradually move in the right direction this year, they are, in our opinion, unlikely to trigger a first hike before mid-2017 when improvements should become more sustained."
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"The low risk of surprise hikes of the BoE's policy rate in the medium term allows lenders to offer extremely low fixed-term mortgage rates. As a result, the market has shifted from the traditional flexible rates toward fixed rates."
"All this means that mortgage rates should stay relatively low even well beyond 2017, keeping mortgages more affordable, which in turn should underpin house price growth."
The report said recent policy measures, such as caps on loan-to-income ratios, are likely to weigh on house prices, but are unlikely to bring the housing market recovery to an end. Another measure unlikely to have a big impact is the buy to let surcharge which will come into force in April.
S&P said the UK's current subdued house building would "continue to exert upward pressure on house prices in the future".