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UK House Prices Rise For Second Month: Halifax

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UK house prices increased for the second straight month in May, but the pace of growth slowed from April, figures from the Lloyds Bank subsidiary Halifax and IHS Markit showed Friday.

Elsewhere, the quarterly Inflation Attitudes Survey from the Bank of England and TNS showed that one-year ahead inflation expectations among Britons eased slightly.

House prices grew 0.5 percent month-on-month in May after gaining 1.2 percent in April, the Halifax survey found. Nonetheless, this was the second consecutive rise in prices and above the forecast of flat growth.

On a yearly basis, house prices increased 5.2 percent in three months to May compared to the 5 percent growth in three months to April. Economists had forecast the rate to remain steady at 5 percent.

Despite the ongoing political and economic uncertainty, underlying conditions in the broader economy continue to underpin the housing market, particularly the twin factors of high employment and low interest rates, Russell Galley, managing director, Halifax, said.

Galley said the current trend of stability based on high employment and low interest rates to persist over the coming months, though clearly any downturn in the wider economy would be keenly felt in the housing market.

In recent months, house price growth on the Halifax index has diverged from the other main indices, Hansen Lu, an economist at Capital Economics, noted. Indeed, there is little sign elsewhere that house price growth has gathered pace, as the Halifax index might suggest, the economist added.

The one-year ahead inflation expectations fell to 3.1 percent from 3.2 percent projected in February, survey data from the Bank of England showed. For the following year, inflation was seen at 3 percent versus 2.9 percent in the previous survey.

For longer-term, say in five years' time, survey respondents projected 3.8 percent inflation compared to 3.4 percent in February. Survey respondents assessed the current inflation rate at 3.1 percent compared to 2.9 percent in February.

When asked about the future path of interest rates, 49 percent of respondents expected rates to rise over the next 12 months, up from 47 percent in February.

Bank of England Governor Mark Carney hinted that a gradual and limited rise in interest rates may be needed in case of a smooth Brexit, in which the UK and EU agree a deal and there is a period of time during which businesses can adjust to the new relationship.

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