UK house prices rise for third consecutive month, Halifax data shows

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UK house prices rose for the third consecutive month in December to their highest level since March 2023, according to data from mortgage provider Halifax that provides further evidence of a rebound in the property market.

Average house prices increased 1.1 per cent last month, the third successive monthly rise following six months of contraction, Halifax said on Friday.

A typical UK home cost £287,105 last month, just over £5,000 more than in December 2022 and the highest in nine months.

Halifax also said property prices last year rose 1.7 per cent, displaying unexpected resilience in the face of high interest rates and the cost of living crisis.

While the lender attributed the monthly price increase in December to a shortage of properties on sale, the figures add to evidence that the property market is improving as mortgage rates ease.

Bank of England data published on Thursday showed mortgage approvals rose to a five-month high of 50,100 in November. The central bank also found that two-year fixed mortgage rates with 60 per cent loan-to-value eased on average from 6.2 per cent in July to 5.1 per cent in November.

Rates on popular five-year deals have also declined since the summer, with big high-street lenders such as NatWest and HSBC announcing cuts to products this week.

Last week, mortgage provider Nationwide said house prices avoided contracting in the four months to December.

Imogen Pattison, economist at the consultancy Capital Economics, said the “big” increase in the Halifax index “confirms that falls in mortgage rates are translating into renewed increases in house prices”.

The property market is highly sensitive to changes in interest rates — which are at a 15-year high of 5.25 per cent — and its health affects the wider economy via home-related spending and household confidence.

Financial markets expect the BoE to start reducing interest rates in the spring, taking the benchmark rate to 3.75 per cent by the end of the year.

Charles Breen, founder of mortgage broker Montgomery Financial, said there was a “renaissance” in the property market in December. “Lenders were proactive in cutting rates, and people have now adjusted to the new normal and accepted rates as they are,” he added.

Kim Kinnaird, mortgage director at Halifax Mortgages, said that although the growth in December was “likely being driven by a shortage of properties”, continuing falls in mortgage rates meant “we may see an increase in confidence from buyers over the coming months”.

Despite the rise in December, Halifax said annual price growth was uneven across regions and nations. Property prices rose 4.1 per cent in Northern Ireland and by 2.6 per cent in Scotland, but they fell 4.5 per cent in the south-east of England.

London remained the most expensive part of the UK, with the average home costing £528,798, although prices in the capital declined 2.3 per cent on an annual basis.

Analysts disagree on the outlook for house prices. With interest rates likely to remain elevated, Halifax predicted house prices would fall 2-4 per cent in 2024.

By contrast, Capital Economics said it expected a rise in house prices this year on the back of improved affordability and the decline in average mortgage rates.

“In light of the adjustments to our mortgage rate forecasts we are revising up our forecast for house price growth this year from minus 1.5 per cent year on year in Q4 to plus 3 per cent,” said Pattison.