UK house prices jump in July; markets recover as Japan calms rate rise fears – business live | Business

Asia-Pacific stock markets are a reassuring sea of green today, after Bank of Japan’s deputy governor Shinichi Uchida played down fears of further interest rate rises (see opening post).

Japan’s Nikkei’s 225 index has closed 1.2% higher today, up 414 points at 35,089, while the broader Topix index has gained 2.2%.

Elsewhere, South Korea’s Kospi index is up 2.15%, Hong Kong’s Hang Seng has gained 1.37% so far today.

Australia’s S&P/ASX 200 is up a modest 0.25%.

Kyle Rodda, senior financial market analyst at capital.com, explains that the prospect of more stable markets in Japan has boosted equity prices broadly.

Rodda says:

The Bank of Japan has effectively blinked.

The turmoil in Japanese markets has shaken the central bank’s confidence that it can tighten much further without damaging not only its own markets and economy but also the rest of the world’s.

BOJ Deputy Governor Uchida said the central bank wouldn’t cut rates in times of market instability, all but boxing itself into a corner where any bias towards hiking interest rates would be self limiting by the subsequent volatility that would likely ignite.

The Japanese Yen dropped on the comments, adding fuel to the Nikkei’s recovery and supporting risk appetite across the globe.

UK regulator Ofwat has declared it intends to appoint an independent monitor for troubled supplier Thames Water.

This monitor will supervise the company’s turnaround plan and report back to the regulator on Thames’ progress.

The monitor would have access to the company’s financial information, and the appointment comes after Thames Water’s credit rating was downgraded twice by ratings agencies Moody’s and S&P in July – which meant the company had breached its licence.

David Black, chief executive of Ofwat, said:

“We are clear that Thames Water needs to remedy its licence breach, turnaround its operational performance and secure backing from investors to restore its loss of investment grade credit rating.

These enforceable commitments will include our putting an independent Monitor into the business, to report back to us on what is happening to drive meaningful change in performance, and to ensure appropriate expertise is added to their Board.

We will continue to monitor progress very closely and will not hesitate to take any further action if necessary.”

Estate agents report that rising confidence, and lower mortgage rates, helped house prices rise last month.

Matt Thompson, head of sales at Chestertons, says:

“Despite uncertainty about what the Bank of England’s decision on interest rates cuts was going to be on 1 August, July’s property market still saw an increase in buyer activity.

This buyer confidence was not only boosted by the General Election results but also by lenders introducing more attractive mortgage products with sub-4% rates.”

Here’s Sam Mitchell, CEO of Purplebricks:

“The growing confidence we’ve seen take hold of the housing market in recent weeks has been supercharged by the Bank of England’s interest rate cut. With lenders already slashing mortgage rates in response to last week’s decision, buyers are beginning to move ahead with purchasing decisions they have been putting off for months.

However, the rental market is still a complete mess and there is a significant way to go before the outlook can be said to be as positive for prospective homeowners. The focus for the coming months must be lowering the barriers to homeownership for first-time-buyers, which will only be achieved by Labour pushing forward with its plans to ‘get Britain building’.”

Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, cautions that cheaper mortgages could lead to higher house prices:

“With an unexpectedly busy start to August in our offices, the long-awaited cut in interest rates and removal of any election uncertainty has clearly gone down very well with prospective buyers and sellers.

“The hot, sunny weather, combined with buyers who may have delayed their plans now wanting to get on with their moves this year, is boosting activity and enquiries. People have long been talking about the prospect of rate cuts and now the first of these is a reality, we are hopeful this activity will continue into the autumn.

“However, buyers need to be careful what they wish for as cheaper mortgages will almost certainly mean higher asking prices. If we see a flurry of new applicants coming back to the market, encouraged by cheaper mortgage rates, then these higher prices are likely to be achieved.”

Halifax’s report shows that Northern Ireland recorded the strongest annual house price growth in the UK last month.

Northern Ireland house prices rose by 5.8% on an annual basis in July, the highest increase since February 2023, to an average of £195,681.

In Wales, house prices grew 3.4%, while in Scotland they gained 2.1% over the last year.

But at the other end of the table, Eastern England was the only region or nation to record a fall across the UK – down 0.4%.

House prices in the North West of England grew by 4.1%, while in London they gained 1.2%.

UK house prices have jumped faster than expected, prompting a forecast they will keep rising through 2024.

New data from lender Halifax, just released, shows that house prices increased by 0.8% in July, following three relatively flat months.

That has lifted the average house price to £291,268, up from £289,042 in June.

Over the last year, prices have risen by 2.3%, Halifax reports, the fastest annual growth rate since January 2024.

Amanda Bryden, Head of Mortgages at Halifax, predicts prices will trend higher through the year, helped by last week’s cut in UK interest rates:

“Last week’s Bank of England’s Base Rate cut, which follows recent reductions in mortgage rates, is encouraging for those looking to remortgage, purchase a first home or move along the housing ladder. However, affordability constraints and the lack of available properties continue to pose challenges for prospective homeowners.

Against the backdrop of lower mortgage rates and potential further Base Rate reductions, we anticipate house prices to continue a modest upward trend throughout the remainder of this year.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The jitters that have gripped the financial markets for days are easing this morning, after one of Japan’s top central bankers tried to calm fears of further interest rate rises.

BoJ deputy governor Shinichi Uchida has said the BoJ should leave interest rates at current levels, having surprisingly raised them last week – a hike that helped to trigger days of market turmoil.

Uchida told business leaders in the northern Japanese city of Hakodate:

“As we’re seeing sharp volatility in domestic and overseas financial markets, it’s necessary to maintain current levels of monetary easing for the time being.”

Uchida added that the recent strengthening of the yen will also affect the BOJ’s policy decision-making – a stronger currency reduces upward pressure on import prices, meaning less need to tighten policy more.

The yen surged after last week’s rate rise, dealing a painful blow to investors who were engaged in the yen carry trade – borrowing cheaply in Japan to buy assets elsewhere.

But it has fallen by 2% today, dropping to ¥147/$ from ¥144/$ yesterday.

The unwinding of the carry trade triggered margin calls, leading to the wave of selling we’ve seen since last Wednesday.

JP Morgan analyst Arindam Sandilya warned yesterday that this process was probably only half over, as Japan had looked likely to continue raising rates.

So Uchida’s comments have had a reassuring impact; Japan’s Nikkei has jumped by 2,2%, up 759 points in late trading at 35,434 points, adding Tuesday’s 10% jump (which followed a 12.4% plunge on Monday).

European markets are set to rally too, by around 1%.

The agenda

• 7am BST: German trade balance for June

• 7am BST: Halifax house price index for July

• Noon BST: US weekly mortgage application data

• 3.30pm BST: EIA oil stocks data