|M/M % Chg||0.2||0.6||0.2|
|Y/Y % Chg||4.1||4.5||4.3|
The Nationwide's February survey of the housing market found prices climbing a sharper than expected 0.6 percent on the month to lift the annual inflation rate by 0.2 percentage points to 4.5 percent. This equalled the second largest monthly rise since March 2016 and means that the yearly rate has been within a relatively tight 4.3 percent to 4.6 percent band for the last five months.
In fact, the key quarterly change in the lender's HPI accelerated to 1.1 percent, up from 0.7 percent in January, and the first increase since September. The familiar combination of historically very tight supply, record low mortgage rates and a still robust labour market remains very supportive although the Nationwide does still see market inflation cooling to an average of just 2 percent for the calendar year.
Recently there has been some talk that next week's Budget could see a switch in the BoE's inflation target from the longstanding CPI to a measure that incorporates an estimate of the cost of home ownership (CPIH). If so, housing market surveys such as this could be about to become all the more important to monetary policy and, hence, financial market behaviour.
The Nationwide House Price Index (HPI) provides house price information derived from Nationwide lending data for properties at the post survey approval stage. Nationwide house prices are mix adjusted; that is, they track a representative house price over time rather than the simple average price.
Home values affect much in the economy especially the housing and consumer sectors. Periods of rising home values encourage new construction while periods of soft home prices can damp housing starts. Changes in home values play key roles in consumer spending and in consumer financial health. During the first half of this decade sharply rising home prices boosted how much home equity households held. In turn, this increased consumers' ability to spend, based on wealth effects and from being able to draw upon expanding home equity lines of credit.
Although the Nationwide data are calculated similar to the Halifax method Nationwide substantially updated their system in 1993 following the publication of the 1991 census data. These improvements mean that Nationwide's system is more robust to lower sample sizes because it better identifies and tracks representative house prices. Historically, the data go back to 1952 on a quarterly basis and 1991 on a monthly basis.
Over long periods the Halifax and Nationwide series of house prices tend to follow similar patterns. This stems from both Nationwide and Halifax using similar statistical techniques to produce their prices. Nationwide's average price differs because the representative property tracked is different in make up to that of Halifax.
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