EUR GBP Lower as UK House Prices Hit a Record High

The EUR GBP exchange rate was lower on Thursday after UK house prices were seen at a record high in September. Detached homes have soared over £40k on the year as the lockdowns led to a need for more space. Minutes from the September ECB meeting also showed the central bank had discussed a new bond-buying plan for next year.

The EUR to GBP rate has breached the 0.8500 level and now looks to the yearly lows near 0.8450.

UK house prices rise at fastest monthly rate since 2007

UK house prices rose in September at their fastest monthly rate since February 2007 due to a “race for space”, according to Halifax.

The bank’s latest data showed that the average price of a home rose £4,400 to a new record high of £267,587.

Property values were up 1.7% in September and 7.4% for the year. The price of detached homes rose by 8.8%, or £41,000 in the year.

Halifax noted that the tapering of the stamp duty holiday was one factor that has pushed prices up. Continually low borrowing costs and a desire for larger properties also added to the rise.

The bank expects prices to be supported into next year by a continued lack of supply. Estate agents are reporting a further reduction in the supply of homes since the stamp duty holiday began to taper.

“The ‘race for space’ as people changed their preferences and lifestyle choices undoubtedly had a major impact,” said Russell Galley, managing director of Halifax.

“Looking at price changes over the past year, prices for flats are up just 6.1 per cent, compared to 8.9 per cent for semi-detached properties and 8.8 per cent for detached. This translates into cash increases for detached properties of nearly £41,000 compared to just £6,640 for flats.”

“Against a backdrop of rising pressures on the cost of living and impending increases in taxes, demand might be expected to soften in the months ahead”.

Martin Beck, economic adviser to the EY Item Club, was also cautious about the outlook for prices.

“Headwinds to further house price growth are increasing,” he said. “Households’ spending power faces both a rising cost of living and the increase in personal taxation due next April.”

European central bank discussed a new bond-buying program

The European Central Bank said that policymakers considered a larger cut in asset purchases last month, while policymakers were said to have discussed a new bond-buying program.

The bank said some members had argued that markets have already prepared for the end of emergency support without a huge effect on market conditions.

“It was argued that a symmetric application of the Pandemic Emergency Purchase Programme (PEPP) framework would call for a more substantial reduction in the pace of purchases,” the accounts of the September meeting stated.

“From this perspective, a pace of purchases similar to the level prevailing at the beginning of the year would be appropriate.”

In energy news, the head of the International Energy Agency said Russia has the capacity to send substantially more gas to Europe and soothe price fears.

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