Surge in House prices recorded in October

Posted by Neil Greenhill in Mortgages on 10 November 2016 - Neil is a Senior Credit Analyst at checkmyfile

House Prices shot up in October, showing a monthly increase of 1.4%. This is according to Halifax’s house price index, which showed its largest monthly rise since March. The growth was well up on the 0.3% recorded by Halifax in September and is in contrast to the signs of a slowing housing market recorded in its index over the last 6 months.

The results of Halifax’s survey are in contrast to an index from Nationwide, which showed house prices remained flat and also well above the 0.2% increase predicted by a poll of economists conducted by Reuters.

The unexpected surge in prices has been put down to increased buyer activity, due to low interest rates after the Bank of England reduced the base rate to 0.25%. There is also a shortage of houses on the market, which in itself may have been caused by the poor performance of the market over the last few months.

However, the figures also showed that despite strong growth in October, year on year growth for the quarter to the end of October was 5.2%, down from 5.8% in the three months to the end of September but higher than the 4.8% predicted by Reuters poll of economists. Both of these figures are well down on the growth recorded in the quarter to the end of March, which saw house price growth of 10%.

Martin Ellis from Halifax comments, "This expected slowdown appears to have been largely due to mounting affordability pressures, which have increasingly constrained housing demand.”

In addition, many believe that Brexit has increased uncertainty for first time buyers and some may have put off their purchase, especially in the immediate aftermath of the vote to leave.

Looking to the future Halifax predicts an easing of house prices, although this will be in some part mitigated by upward pressures from a continuing shortage of properties and mortgage companies continuing to offer competitive mortgage deals.

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