UK House Prices Rise Sharply As Sterling Falls

It was announced earlier this morning by one of the UK’s largest mortgage lenders Halifax that UK house prices had risen by 1.1% last month meaning the average house price has risen by  7.7% annually. As previously discussed in this currency blog rising house prices are theoretically good news for an economy and therefore the currency, but the concern at present is that UK house prices are rising too fast and could be creating a new housing bubble which, should it burst could be catasrophic for the UK and Sterling. So, while rising house prices are good, it is the pace at which prices are rising that is going to be important and should this pace continue then it will not be long before house prices are back at the same high levels we saw back in 2007. This means that the effect on Sterling is unclear and in fact, despite this news which could be construed as positive, we have seen GBP exchange rates weaken against a number of the major currencies.

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