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UK house prices rose for the fourth consecutive month in January to their highest level since October 2022, adding to signs of stabilisation in the property market as mortgage rates ease.
The average UK house price increased 1.3 per cent between December and January, mortgage provider Halifax said on Wednesday. It followed expansions in the previous three months, and was the fastest monthly rate of increase since June 2022.
The rise took the average house price to £291,029, the highest since October 2022. Prices were 2.5 per cent higher than in January last year, the fastest annual rate in 12 months.
The data is the latest sign that the property market is recovering from the hit to demand caused by higher borrowing costs since the Bank of England began raising interest rates in December 2021.
With financial markets expecting the central bank to cut its benchmark rate from a 16-year high of 5.25 per cent this year, mortgage rates on popular fixed deals have declined since the summer.
Kim Kinnaird, director at Halifax Mortgages, said “increased confidence among buyers and sellers” had been driven by “the recent reduction of mortgage rates from lenders as competition picks up, alongside fading inflationary pressures and a still-resilient labour market”.
“This has resulted in a positive start to 2024’s housing market,” she added.
Last week, lender Nationwide reported that house prices rose 0.7 per cent month on month in January. Both Nationwide and Halifax base their house price indices on the mortgages they approve.
Separate BoE data last week showed that real interest rates on new mortgages fell for the first time since 2021 in December, helping lift mortgage approvals to a six-month high.
Quoted mortgage rates on popular fixed deals, such as the two-year and the five-year, declined to a seven-month low, the BoE figures showed.
Stephen Perkins, managing director at Norwich-based broker Yellow Brick Mortgages, said January marked “a real bounceback in activity levels” in the housing market, with inquiries from prospective buyers “massively up, buoyed by growing confidence around mortgage rates in the medium term”.
Despite declining in the second half of 2022 and most of 2023, house prices in January remained £52,000 above their level in February 2020, Halifax said, reflecting the boom in demand during the pandemic when interest rates were at a record low.
Prices rose year on year in most regions, with Northern Ireland registering the fastest pace at 5.3 per cent. While London posted a fall of 0.4 per cent, the south-east of England registered the largest annual drop of 2.3 per cent.
Tom Bill, head of UK residential research at estate agency Knight Frank, said more buyers and more houses being marketed as mortgage rates eased meant “demand and activity levels will only get stronger, leading to a modest single-digit price increase this year”.