RTTNews - House prices in the UK unexpectedly increased in May, after registering three consecutive months of declines, Lloyds Banking Group Plc's Halifax division showed Thursday. However, the report cautioned that it was important not to place too much weight on any one month's figure.
House prices rose 2.6% month-on-month in May, after recording declines ranging between 1.8% and 2.3% in the previous three months. Economists expected a fall of 1%.
Annually, house prices dropped 16.3% in May compared to a 17.7% fall in the previous month. Economists expected prices to drop 17.2%. The rate of change in house prices on an annual basis is measured by the average for the latest three months against the same period a year earlier.
In May, the house price to earnings ratio - a key affordability measure, declined to 4.36 from a peak of 5.84 in July 2007, to reach the level last seen in January 2003.
Data released by the Bank of England said the number of mortgages approved to finance house purchase - a leading indicator of completed house sales, rose 19% sequentially in the first quarter, but fell 45% year-on-year.
The proportion of disposable earnings devoted to mortgage payments for new borrowers declined significantly to 31% in the first quarter from a peak of 48% in the third quarter of 2007. Mortgage payments relative to earnings are now below the long-term average of 37% recorded over the past 25 years, Halifax said.
The report said there were some tentative indications of a possible stabilization in activity, although at a very low level. Moreover, lower interest rates raised affordability, which in turn helped to increase the proportion of first time buyers.
In March, first-time buyers accounted for 40% of all those purchasing a home with a mortgage, which is the highest percentage since April 2005. The number of first-time buyers, however, remains very low, and at 12,500 in March was one-third lower than a year earlier, Halifax added.
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