The Halifax Bank of Scotland published its monthly indicator on housing prices today, revealing a stark downturn in housing prices by approximately 1.4% since March. The reading comes one week after a similar report by Nationwide which highlighted a 0.2% decline in housing prices over the same period.
Many forex analysts have commented that the Halifax indicator tends to be more volatile than its Nationwide counterpart, but forex traders should look to both indicators together to get a feel for what is happening in the housing market across the United Kingdom.
Unfortunately, both reports for the past month tell the same story: housing prices are in decline. Both British HPI reports gather their information by looking at the value of homes listed on new mortgage approvals.
A recent article in the Financial Times noted that high unemployment, tightening monetary policies, negative real income growth, and recent declines in consumer confidence across the UK have all played a significant part in the depreciation of home values. Furthermore, elevated debt levels and the increased difficulty in getting a mortgage due to bank limitations have also generated a downturn in the British housing market.
What this could mean for traders reading this forex blog is that the British pound (GBP) is coming under the pressure of market forces which have indirect links to the value of currencies. If consumer spending is in decline, which it tends to be when confidence drops and paychecks become weakened, the respective value of the currency also tends to enter a downturn.