The series of rises in UK interest rates over the past 9 months from 4.5% to 5.25% has started to have an impact on the UK housing market, according to a survey by Royal Institution of Chartered Surveyors' (RICS).The gain for February is the slowest in over 9 months,

RICS UK House Price Growth Weakens as Interest Rate Rises Start to Bite

However, earlier in the month, the Halifax reported that house prices jumped by 1.8% in February, keeping the pace of growth at an annual 9.9%.

The fallout in the US Housing market has thus far failed to have any impact on the UK housing market, which continues to experience supply constraints due to shortages of properties on the market and continuing demand from the buy-to-let sector, especially in light of continuing influx of eastern european migrant workers, which means that demand still tends to exceed supply.

The UK has its own 'subprime' problem with many low income first time buyers being forced to take out mortgages well beyond traditional measurements of affordability of 3.5X to 4X joint earnings. So far the number of defaults is nowhere near that reached in the US and the sector is unlikely to experience a 'crash' during the remainder of 2007.

However, regional variations are expected with signs that the housing market in the Midlands is stagnating whilst London and the South East continues to perform strongly.

The Market Oracle forecast remains for UK house prices to end 2007 up between 5% to 7%. UK House Prices continue to Rise whilst the US Housing Market Slumps . With no real sign's of the start of any market meltdown as experienced by the US.

It would take interest rate rises beyond 5.75% to have a serious impact on the UK housing market during the remainder of 2007.

By Sarah Jones

MarketOracle.co.uk

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