Unexpected increase in UK house prices

Nationwide reports that after increasing by 0.4% in April, UK house prices resumed growing in May as higher wages and reduced inflation boosted consumer confidence.

The building society said that this month's average property price was £264,249, down from £261,962 in April.

Because the Bank of England is not expected to lower interest rates as soon or as sharply as first anticipated at the beginning of this year, mortgage rates in the UK have been quite high.

The increase in May offsets a 0.4% decline in April.

According to Nationwide, house prices increased by 1.3% in the year ending in May. In contrast, there was 0.6% increase in the year ending in April.

Consumer confidence has "improved noticeably over the last few months, supported by solid wage gains and lower inflation," according to Nationwide.

On June 20, the Bank of England will make its next interest rate announcement. Since last year, it has maintained borrowing prices at 5.25%. The Bank wants to maintain 2% inflation.

When deciding whether to lower interest rates, the Bank of England takes into account inflation in the services sector, which includes industries like hospitality and education and provides an overview of wage growth and unemployment rates.

This measure of inflation, which only slightly decreased to 5.9% in April, has not decreased as much as the headline number.

Nationwide focuses on its own mortgage lending when calculating its numbers; buy-to-let and cash purchasers are left out.

A third or so of house sales were accounted by cash purchasers.

(Sources: bbc.co.uk)