House prices still rising, but slowdown coming says Halifax

RISES in interest rates have done little to take the steam out of the housing market so far – but Halifax predicts a slowdown later this year.

The bank’s latest index for January said house prices rose by 0.3% that month, the lowest increase since last June.

But house prices are still at record highs of £276,759 on average.

Last week the Bank of England put rates up and is expected to do so at least three more times this year as it fights to combat inflation.

Banks had already put up the cost of new mortgage deals. Experts say those two measures are sure to hit affordability and thereby reduce prices.

Russell Galley at Halifax says that house prices are still outstripping wages growth.

He added: “This situation is expected to become more acute in the short-term as household budgets face even greater pressure from an increase in the cost of living, and rises in interest rates begin to feed through to mortgage rates.

"While the limited supply of new housing stock to the market will continue to provide some support to house prices, it remains likely that the rate of house price growth will slow considerably over the next year.”

Martin Beck, chief economic advisor to the EY ITEM Club, says: “January’s slowdown in the Halifax measure may be a sign of things to come. This year won’t see a boost to prices from the stamp duty holiday which ran through much of 2021. To the extent the tax holiday brought forward purchases, its after-effects may drag on housing market activity in the near term. Moreover, the EY ITEM Club thinks the Bank of England will add to recent rises in interest rates by raising rates twice more this year, pushing up mortgage rates. And the rising cost of living faced by households from higher inflation and tax rises mean it’s likely that fewer people will be able to afford to borrow the necessary amount they need to buy at higher mortgage rates.”

House prices are unlikely to actually fall, economists think.