UK House prices weigh on Sterling
28 March 2008
The Pound weakened across the board this morning, after it was revealed that UK house prices fell for a fifth consecutive month according to the Nationwide building society. The survey indicated that prices fell 0.6%m/m in March, bringing the annual rate of inflation to 1.1%y/y; the slowest rate of growth in 12 years. The average house price in the UK fell to £179,110 in March, from £179,358 in February.
The survey reaffirms that the UK housing sector remains under significant pressure from increased affordability constraints and markedly tighter lending conditions. Despite the Bank of England cutting the UK base rate by 0.5% in the last 4 months, interbank rates (the rate at which banks lend to each other) have remained elevated. The three-month London Interbank Offered Rate (LIBOR) rose above 6% this week, its highest level this year and 0.75% above the Central Bank's base rate.
The data came after the Nationwide yesterday revealed it was withdrawing some of its best deals from the mortgage market in an attempt to concentrate of its current lending book. It said it would raise the rates on all fixed-rate products by 0.2% and increase some tracker mortgages by up to 0.57%.
In consequence, Sterling fell against the US Dollar and plunged to an all time low against the Euro, making one Pound worth €1.2631.