House price rises to ebb away in second half

The 8.1% increase in house prices in the first half of 2011 will largely reverse in the next six months, as oversupply of property runs up against lack of funding, according to Rightmove.

It has predicted that asking prices across England and Wales will fall 7% in the second half of the year, mirroring the pattern of 2010.

However, Rightmove has changed its forecast 2011 will end with house price falls and now expects an increase of 2% for the year as a whole.

Rightmove's index revealed the average property asking price grew for the sixth consecutive month by 0.6% in June to £240,394 - the highest price ever recorded by Rightmove for June.

However, this was down from April's increase of 1.3% and a marked slow down on previous months' growth.

Miles Shipside, director of Rightmove, said: "With mortgage approvals stuck at half the normal level, the number of sellers who can find a buyer is likely to be reduced by a similar proportion.

"Sellers will need to paddle hard to catch a buyer with funding, or they will find themselves well and truly grounded and unable to move home."

The latest CML figures reveal while gross mortgage lending increased 12% to £11.3bn in May, lending for house purchase remains below the levels recorded for the same month last year.

In addition, interest in remortgaging is also predicted to reduce as the expectation of a rise in base rate decreases.

Michael Coogan, CML director general, added: "Gross mortgage lending in May recovered after low activity levels in April. Distorting effects from Easter and bank holidays cloud the current picture, but the likelihood seems to be for essentially flat levels of lending over the next couple of months."