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UK house prices rise for fourth month running on lower mortgage rates

UK homes (file photo)
UK homes (file photo) Copyright SANG TAN/AP
Copyright SANG TAN/AP
By Indrabati Lahiri
Published on Updated
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Northern Ireland saw the highest growth within the UK, where house prices increased by about 5.3% annually.

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The outlook for the UK housing market seems to be a little brighter as house prices went up for a fourth consecutive month in January 2024, according to data from the Halifax House Price Index. 

The Index revealed that the cost of an average house in the UK last month was estimated to set buyers back by about £291,029, which is £3,900 more expensive than in December. Good news for home owners but perhaps not for buyers.

The year-on-year Halifax House Price Index for January inched up 2.5% from 1.8% in December. This increase was also the most since January 2023. Meanwhile, month-on-month, house prices increased 1.3% in January, from 1.1% the previous month.

Northern Ireland leads the way in house prices

Northern Ireland saw the highest growth in the UK, with house prices jumping 5.3% annually. An average house in Northern Ireland is now valued at about £195,760, approximately £9,761 more than in January 2023.

Welsh and Scottish house prices also experienced robust growth, both inching up 4%, to £219,609 and £206,087 respectively. Yorkshire and Humber house prices grew by 2.8%, whereas houses in the North West became 3.2% costlier. East Midland houses only saw a 0.5% rise, but North East houses advanced 2%.

However, houses in the South East did not do as well as the rest of the UK, dropping about 2.3%, or £8,866 to an average of £379,220.

Kim Kinnaird, Halifax Mortgages director highlighted, as reported by Morningstar: “The recent reduction of mortgage rates from lenders as competition picks up, alongside fading inflationary pressures and a still-resilient labour market has contributed to increased confidence among buyers and sellers.

"However, while housing activity has increased over recent months, interest rates remain elevated compared to the historic lows seen in recent years, and demand continues to exceed supply. For those looking to buy a first home, the average deposit raised is now £53,414, around 19% of the purchase price. It’s not surprising that almost two thirds of new buyers getting a foot on the ladder are now buying in joint names.”

More likelihood of interest rate cuts in the next few months

Nationwide’s chief economist, Robert Gardner, said, as reported by The Guardian: “While a rapid rebound in activity or house prices in 2024 appears unlikely, the outlook is looking a little more positive.

"This follows a shift in view among investors around the future path of interest rates, with investors becoming more optimistic that the Bank of England will lower rates in the years ahead.”

On the other hand, the Bank of England (BoE) has maintained a more cautious stance, choosing to keep interest rates stable at 5.25% at its February meeting. Although independent economist and monetary policy committee (MPC) member Swati Dhingra suggested cutting interest rates immediately, the BoE chose to wait for more convincing data that inflation was taming.

However, the BoE also hinted at cutting interest rates in the next few months and revealed that it expects inflation to fall even more by summer.

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