A gentle rise in mortgage interest rates led to a drop in mortgage applications for purchase over April, reversing some of the gains seen since the start of March. Subdued home buying sentiment suggests sales will struggle to gain traction this year, which will weigh on house price growth. Annual growth slowed to a 6½-year low of 4.0% in February, and we expect it will fall to 2.0% by the end of the year. By contrast, rental growth accelerated over the past couple of months. With limited evidence of a tightening in market conditions, the prime cause of the rise looks to be stronger earnings growth.
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