House prices bounce back
House prices have bounced back in defiance of economists who warned of a double-digit drop at the start of the year.
The price of an average home rose by almost £5,000 on average in 2023 following three consecutive monthly rises at the end of the year.
A shortage of homes and slowly improving mortgage rates helped to revive the market which had previously been in decline in the middle of the year, experts said.
House prices grew by 1.1pc in December, marking the third monthly rise in a row after half a year of decline. The typical home now costs £287,105, £4,800 higher than the end of 2022, Halifax said.
It comes amid expectations that the Bank of England will cut interest rates this year, with high street banks now beginning to offer mortgage rates below 4pc.
Anthony Codling, of the bank RBC Capital Markets, said the rise showed pessimism around the UK housing market had been misplaced.
“Most, including us, thought house prices would fall during 2023, and most think they will fall in 2024, but not us,” he said.
“With rising wages, falling inflation, falling mortgage rates, and increasing talk of election related housing stimulus packages we expect house prices to rise in 2024.”
Nevertheless, Halifax has suggested that prices could still fall between 2pc and 4pc this year.
Kim Kinnaird, of the lender, said: “As we move through 2024, the UK property market will continue to reflect the wider economic uncertainty and buyers and sellers are likely to be naturally cautious when considering making a move.
“Our latest forecast suggests house prices could fall between 2pc and 4pc during the coming year, although, as with recent years, forecast uncertainty remains high given the current economic climate.”
Rival banks have predicted that house prices will either fall marginally this year or not at all. HSBC recently revised its house price forecast, saying “we no longer see any further falls from here”.
Last week rival lender Nationwide said that house prices had fallen by around 1.8pc in 2023, rather than the rise reported by Halifax.
This is because each bank bases its forecasts on its own loan book. The Office for National Statistics provides the most accurate snapshot of the housing market, but it is published two months after the data is recorded.
Nicky Stevenson, of the estate agents Fine & Country, said: “Although there is a huge disagreement between Halifax’s 1.7pc price rise for the year and Nationwide’s 1.8pc fall, the property market has performed far more strongly than many analysts predicted.
“There are many reasons for optimism as we head into the new year. Economic stability is encouraging lenders to offer increasingly competitive mortgage rates, widening affordability for buyers and driving activity.”
This week HSBC became the first major high street lender to offer a mortgage deal with a rate below 4pc for homeowners looking to remortgage. The lender also reduced its two-year fixed deals to 4.49pc, below the 4.5pc threshold for the first time since June, according to the broker L&C Mortgages.
Halifax has also announced cuts on some of its mortgage deals by as much as 0.92 percentage points. Meanwhile, Leeds Building Society has also recently cut rates by 0.49 percentage points and now offers a two-year fix at 4.6pc.
UK Finance, the banking trade body, found that gross mortgage lending dropped by more than a quarter last year and forecast falls of a further 5pc in 2024.
However the property listings site Rightmove said that more than 10,000 new properties came to market on Boxing Day alone, 26pc higher than last year in what it described as an “early positive sign” of a bounceback.
Meanwhile, net mortgage approvals for house purchases rose from 47,900 in October to 50,100 in November, according to the latest figures from the Bank of England.
