On an annual basis, prices in June were 3.5% lower as measured by the average for the three months to June against the same period a year earlier. This was an improvement on the annual rate of -4.2% recorded in May.
Low interest rates have helped to improve affordability. Typical mortgage payments for a new borrower have fallen from a peak of 48% of average disposable earnings in mid 2007 to 28% in 2011 Quarter 2. This key measure of affordability is at a better level than the long-term average over the past 25 years (37%) and is an important factor supporting housing demand. Mortgage rates have fallen from an average of 5.84% to 3.85% over this period.
Martin Ellis, Halifax housing economist, said:
"House prices in the three months to June were 0.5% lower than in the previous quarter. This was the smallest quarterly fall in prices since the second quarter of 2010. There was a 1.2% rise in prices in June.
"Low interest rates, an increase in the number of people in employment and some tightening in market conditions earlier in the year are likely to have been the main factors behind the recent improvement in price trends. A slowly improving economy and sustained low interest rates should help to support broad stability in the market over the coming months.
"The market is, however, likely to continue to face significant headwinds which are expected to constrain housing demand. Low earnings growth, higher taxes and relatively high inflation are all continuing to put pressure on household finances."
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