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December rise in house prices & the base rate stays at 5.5%

 

The latest Halifax house price index, released on 8th January, showed an unexpected 1.3% rise in house prices for December. This means that the average house price in the UK has risen by £2,500 to an eye-watering £197,000. However, this rise is in contrary to a report by the Nationwide which signalled a 0.5% drop in house prices during the month.

 

Analysts have been quick to point out that the optimistic Halifax report does not signal the end of the slow down in the market. In fact they have gone on to say that it is evidence of turbulence in the market, as opposed to a sustained price growth. Martin Ellis, chief economist at Halifax stated that a mix of rises and falls is a - typical characteristic of a subdued market - and the country's biggest mortgage lender predicts a stagnant market for 2008. The increase followed three consecutive months of falls, giving 2007 a house price inflation level of 5.2%; well below the 8% long term average. In real terms, this meant that the average house cost £11,850 more in December 2007, than in December 2006. According to the Halifax's three month measure, a more reliable indicator of the market, house prices dropped 0.8% in the last quarter of the year. This was the first quarterly drop since mid-2000 and the biggest since mid-1995. On the 10th January the Bank of England resisted pressure to give the market a helping hand by keeping the interest base rate at 5.5%. It has also become apparent that a number of lenders have not passed on the interest rate cut of 6 weeks ago to their customers. Lisa Taylor from the independent rates comparison service, Moneyfacts, stated that there were ten lenders yet to announce a change in their rates. On the BBC's Moneybox programme she pointed the finger at three in particular; Skipton, Principality and Manchester.




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