July 25, 2014 / 12:05 AM / in 5 years

British house prices grow at slowest rate in over a year in July: Hometrack

LONDON (Reuters) - British house prices grew at their slowest rate in over a year in July in the latest sign that Britain’s housing market may be starting to cool, a survey showed on Friday.

Neighbouring blue and a red front doors are seen in south London June 3, 2014. REUTERS/Andrew Winning

House prices rose by 0.1 percent this month - the slowest growth rate since February 2013 - easing from a 0.3 percent increase in June, according to property analysts Hometrack.

Britain’s housing market has had a rapid recovery this year, with prices rising more than 11 percent and more than double that in London by one measure.

But Hometrack said the prospect of higher interest rates and the introduction of tougher mortgage rules could be denting appetite.

“The lead indicators in the survey have pointed to a slowdown in the rate of growth for the last two months, in part due to warnings from the Bank of England and others of a possible house price bubble,” said Richard Donnell, director of research at Hometrack.

“There’s a growing element of caution from buyers about the market outlook as the prospect of future interest rate rises looms, and the new tougher mortgage market checks implemented as part of the Mortgage Market Review (MMR) impact on demand.”

Tighter rules on mortgage lending, requiring banks to check more closely that borrowers will be able to afford loan repayments when interest rates go up, took effect in April and further restrictions were introduced in late June.

Economists are expecting the Bank of England will raise interest rates in the first quarter of 2015, but they also see a chance of it happening this year.

The survey showed homeowners were finding it more difficult to achieve initial asking prices as housing demand fell slightly in July.

The momentum of price rises in the London market - which has spearheaded Britain’s property recovery - also slowed in the last few months.

Just 12 percent of London postcodes registered price gains in July, down from around 41 percent in June and about 64 percent in May.

Reporting by Tess Little; Editing by Ana Nicolaci da Costa and Robin Pomeroy

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