House prices up 5.2%
BRITAIN’S struggling housing market received a huge boost yesterday as the country’s biggest mortgage lender announced a rise in property prices.
The Halifax bank says its figures for December show that the market grew 5.2 per cent year-on-year – dispelling scaremongering predictions that prices will fall this year.
The bank also reported a 1.3 per cent hike in house values during December itself, all but wiping out falls in the previous three months.
It is the biggest monthly rise since February last year and gives further ammunition to experts who predict that property prices will continue to rise steadily this year.
Overall, the value of the average home in the UK now stands at £197,039 – around £11,759 more than at the start of last year.
The Halifax expects price rises to slow in 2008 but says this should be seen in the context of a 182 per cent surge in property prices over the past 10 years.
The optimistic outlook means tomorrow’s Bank of England decision on interest rates is now poised on a knife edge.
The latest figures may prompt the Bank to keep rates on hold before considering further cuts later in the year.
But many City economists still expect the Bank to cut interest rates by 0.25 per cent for the second month in succession to 5.25 per cent to ease the pressure on home owners.
Howard Archer, chief UK and European economist at analysts Global Insight, said: “Halifax hints that house prices may prove relatively resilient over the coming months, thereby easing concerns that a sharp correction in house prices is looming.
“But we still believe there is a strong case for the Bank to cut rates to 5.25 per cent as soon as Thursday and by February at the latest.”
Tony Ahearne, of financial ratings online service Moneyspider.com, said: “These figures showing a £2,500 rise in the cost of an average home last month is bound to put a dampener on the prospects of a rate cut.
“But millions of home owners will be desperately disappointed if the Bank of England does not cut the base rate.”
A home owner with a £200,000 interest only mortgage would see their monthly payments drop by £41.67 if the predicted rate cut is announced.
Martin Ellis, Halifax chief economist, said: “Higher mortgage repayments in response to the series of five interest rate increases between August 2006 and July 2007 and falling earnings have put pressure on household incomes, resulting in a slowdown in both house price growth and activity in recent months.
“But sound economic fundamentals and lower interest rates will support house prices during 2008.”
Despite the December rise, however, there is little doubt the property market is slowing down.
The Council of Mortgage Lenders yesterday said the number of new mortgages taken out had fallen to a seven-month low in November.
Gross lending totalled £30billion in November, down 10.4 per cent from £33.5billion in October.
