06 Feb House prices up 0.6% in January
The average price of a home rose by £844 in January, according to the latest Halifax House Price Index, as record low interest rates continued to support demand. Halifax reported a 0.6 per cent increase in prices, taking the average property value to £160,907 in January compared to £160,063 in December.
The Halifax’s rolling three-month measure – used to give a more stable picture of house price trends – showed prices down 0.9 per cent since October.Overall, house prices have changed little in the past eight months, Halifax said. The average price in January, at £160,907, was very similar to that in May 2011 – £161,039.
Halifax said record low interest rates of 0.5 per cent, unmoved since March 2009, continued to underpin demand, and offset negative developments in the economy that would otherwise push prices lower.Low interest rates have seen mortgage payments fall to their lowest level as a proportion of household earnings for a new borrower for 14 years, Halifax added.
Looking ahead, Martin Ellis, housing economist at Halifax, said: ‘If the UK can avoid a prolonged recession, we expect broad stability in house prices in 2012.’Prospects for house prices over the coming months will depend on events in the eurozone and the repercussions of developments there for the UK economy, Halifax added.
Catch 22: Nationwide said in its report last week that as a percentage of salary the mortgage costs for owning a first home were near the lowest they had been for ten years – but most first-time buyers remain locked out by big deposit demands.The Halifax report follows Nationwide’s house price index last week, which showed prices dipping slightly in January, with a 0.2 per cent fall. Nationwide said that as a percentage of salary, first-time buyers were benefitting from monthly mortgage payments costing the lowest amount for almost ten years. However, it added that many first-time buyers found themselves locked out by big deposit demands and tight credit scoring.
The Halifax figures come as the industry-wide number of mortgages approved to finance house purchases – a leading indicator of completed house sales – held steady at close to 53,000 for the third successive month in December.Overall, approvals in the final three months of 2011 were 3 per cent higher than in the previous quarter and 16 per cent higher than in the same period of 2010, according to the Bank of England. But mortgages for house purchase are still running at about two-thirds below long-term average levels.Housing demand may have been helped by a slight improvement in the number of people in employment in the three months to November, which was 18,000 higher than in the preceding three months.
Elsewhere, Halifax said typical mortgage payments for a new borrower – both first-time buyers and home-movers – at the long-term average loan to value ratio stood at 27 per cent of disposable earnings in the fourth quarter of 2011. This was well below the average of 37 per cent recorded over the past 27 years.
Howard Archer, chief UK and eurozone economist at IHS Global Insight, said the monthly increase in January did not alter his view that house prices were likely to decline by 5 per cent this year. He said: ‘We suspect that low wage growth, rising unemployment and persistent concerns over the economic situation and outlook will limit potential buyers and weigh down on house prices.’