In response to the rising fears of what effect a housing bubble would have on the UK economic recovery, the UK government introduced a Mortgage Market Review in late April – a series of measures including a ceiling on high loan-to-income lending and a 3 percent interest-rate stress test. These have had limited impact on prices so far. In June, house prices grew at their fastest rate in nine years, rising above their pre-crisis 2007 peak, according to Nationwide.
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The July slowdown in house price growth is "probably a good thing", Lucian Cook, director of residential research at Savills told CNBC by phone.
"It may well be a response to the Mortgage Market review", he added and is "likely to prevent people from overstretching themselves with a view to interest rate rises".
The 'year to move'
"The significance of the first fall of the year in new seller asking prices should not be overstated in spite of the dampening effect of the more cautious tone from the Bank of England", the report says, highlighting the fact that July has seen prices fall in six of the last 10 years.
This year's drop, it argues, reflects a "normal seasonal slowdown".
Savills's Cook warned that people should be "incredibly careful" when looking at month-on-month data and "shouldn't be reading too much into a single-month movement".
In fact, in spite of the fall, the property website has upgraded its house price year-end forecast. It now expects prices to hit the top of its original guidance of 6-8 percent and describes 2014 as "the year to move".
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According to the property website, while the stricter lending rules will restrain buyers in high loan-to-income brackets, the "equity-rich third-timer" category will benefit from the Help to Buy scheme. The Help to Buy scheme, introducedby the government in March 2013, aimed to boost house-buying activity by allowing prospective buyers to access a mortgage with a 5 percent deposit only.
However, for Neil Chegwidden, director of residential research at JLL, the new rules could have had an impact on sentiment, curtailing activity and house price rises.
"What we saw from Help to Buy was an increase of urgency in the market", he explained in a phone interview. Buyers, convinced prices were going to go up, sought to buy as quickly as possible. But now, "people are probably less certain about rising prices and that's just taking the edge off the market."
"We'll probably see prices stabilising sort of around where they are currently, in most locations", Chegwidden concluded.
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