House prices rise for fourth month running as mortgage rates fall

HOUSE prices rose last month as falling mortgage rates increased the number of potential buyers, one of Britain’s biggest lenders has said.

Property values increased by 1.3pc in January compared with the previous month, according to the Halifax house price index. Halifax found that average house prices increased to £291,029, which was £3,900 more than in December. It marked the fourth successive monthly gain and is the latest sign that the property market is emerging from its downturn after house prices fell for six consecutive months.

Property prices were up 2.5pc compared with the same period last year, which was the highest annual growth rate since January 2023.

Kim Kinnaird, Halifax Mortgages director, said prices have been boosted by mortgage rate cuts and falling inflation, while the ongoing strength of the employment market has also bolstered consumer confidence. Lenders slashed rates after a larger than expected drop in November’s inflation data raised hopes that the Bank of England will soon start cutting interest rates.

The average rate on a two-year fixed deal is now 5.57pc, according to Moneyfacts, down from a peak of 6.85pc over the summer.

The Halifax index strikes a markedly more upbeat tone than official house price figures, which pointed to a 2.1pc year-on-year decline in November.

The divergence suggests the housing market is at a turning point. The Halifax index is based on mortgage approvals, meaning it is more forward looking than the Office for National Statistics’ index, which is based on completed deals agreed several months earlier. However, Ms Kinnaird warned that affordability pressures remain. Mortgage rates are still roughly double what they were before the Bank of England began raising interest rates at the end of 2021.

“Further modest falls [ in house prices] should not be ruled out, against a backdrop of broader uncertainty in the economic environment,” she said.

First-time buyers are taking whatever steps they can to reduce the burden of their mortgage payments in the face of high rates. Nearly two thirds (63pc) of first-time buyers are purchasing using joint-salary mortgages, Ms Kinnaird said.

Estate agents said the property market had been boosted by the end of the cycle of interest rate rises that began in December 2021.

Guy Gittins, the Foxtons chief executive, said: “Interest rates being held at 5.25pc since September has helped to both steady and stimulate the UK property market, with buyers reacting positively to a greater degree of economic stability and a reduction in mortgage rates.”