The rise in house prices in the UK accelerated to 11.1 per cent in May from 10.9 per cent in April, according to a leading building society, although the lender also said that there are signs that activity in the housing market is starting “to moderate”.
Indeed, house prices in May only rose by 0.7 per cent, compared with a 1.2 per cent rise in April, which may be because new mortgage lending rules, called the Mortgage Market Review (MMR), officially started in April.
The building society added that the Government’s Help to Buy mortgage guarantee scheme seemed to have played little part in house price growth, taking into account statistics released last week by the Treasury.
The building society’s comments came as the European Commission called on the UK to raise taxes on higher-value properties, adjust the Help to Buy scheme and build more new housing.
In many areas, the Commission’s report echoes the concerns of Governor of the Bank of England, Mark Carney, who spoke recently of the potential risks posed by the housing market.
In order to address these risks, the EU executive recommends adjusting the second stage of the Help to Buy scheme, which is not restricted to new builds, and mitigating the risks related to high mortgage indebtedness.
The report goes onto say that the UK Government has failed to adequately address the “structural phenomenon” of the lack of new houses, which the Commission believes is likely to extend into the medium term.
Prime Minister David Cameron and Chancellor George Osborne are said to be “quietly fuming” at what they see as the interference of the European Commission, which has also suggested that the Government should prioritise capital spending, affordable childcare and bank lending to small firms.
However, a Treasury spokesman said that, as one of the fastest growing economies, the Government would “listen with interest” to what the Commission had to say.