House prices in London and the South pushed up the average property values for May by 0.2 per cent according to Hometrack.  The report identifies that London’s average house price increased by 0.6 per cent and 0.1 per cent in the South East and East Anglia.  In the North, the Midlands, and in Wales the average house prices remained the same.  May usually shows an increase in home sales but the month did not show a significant boost.  Hometrack reported that house prices outside of London would remain in turmoil as supply out-numbered demand. 

According to estate agents there were fewer new buyers in May with only a 0.4 per cent increase in comparison to a 2.1 per cent increase in April.  The number of properties coming in to the market increased only by 2.2 per cent which is still above the level of demand.  Only in London has demand increased above supply in the last three months.  London has also experienced the highest ratio of selling price to asking price at 94.6 per cent. 

Richard Donnell, director of research at Hometrack, remarked, “Increased mortgage rates and mounting concerns over the impact of the eurozone on the UK’s economic growth and employment are likely to keep demand and prices in check as we move into summer.”

Interest rates for purchase mortgages and remortgages have been increasing.  Lenders are facing higher funding costs and have been passing along the added expense to new borrowers and current customers.  Along with higher interest rates on offerings lenders have also been increasing their standard variable rate.  Increased borrowing rates are not likely to bring more buyers to the market.