Halifax joined the other lenders in forecasting that house prices would rise more slowly in the next year. It predicted yesterday that house price inflation would drop from 6 per cent in 1997 to around 5 per cent in 1998 and 4 per cent the following year. Nationwide, the biggest building society, believes growth will fall even more sharply, from 12.6 per cent this year to 7 per cent in 1998.
Hopes that the economy is gliding towards a gentle slowdown got a boost from separate figures showing that the number of British businesses going bust fell to a seven-year low in 1997. The figures, published by the business information group Dun & Bradstreet, showed that 36,368 businesses failed this year - a drop of nearly 5,000 on 1996 and the lowest level of failures since 1990.
Philip Mellor, a senior analyst at Dun & Bradstreet, said: "Provided there is no substantial downturn in the economy, the country's annual tally of business casualties will be back to pre-recessionary levels by the millennium."
The steep fall in the number of businesses going to the wall in 1997 came as a surprise. After a sharp reduction in 1994, the decline in the failure rate appeared to have reached a plateau at around the 40,000 mark. But there was a marked slowdown in the number of business failures as the year went by with the figures dropping from more than 10,000 in the first quarter to under 8,000 in the last three months of the year.
Most predictions for the housing market are, like forecasts for the economy as a whole, converging on a soft landing. Halifax's forecast for house prices during the next year - with a regional range of 3 to 8 per cent - is close to recent predictions from Nationwide and the Council of Mortgage Lenders (CML). The CML put the next year's increase at 5-6 per cent, while Nationwide opted for 7 per cent.
However, this near-consensus disguises a sharp difference between the two big lenders as to what has happened during 1997. According to Halifax, house price inflation in the UK did not exceed 7.2 per cent at any point in 1997.
But according to new December figures from Nationwide, prices increased by 0.8 per cent during the month to take the annual rate to 12.6 per cent. While the upward trend has slowed, its recorded UK average house price has now reached pounds 62,037.
Paul Sanderson, head of research, said: "The market has come off the boil recently." The outlook for 1998 depended on the severity of the economic slowdown, he said.
City economists are inclined to split the difference, saying house prices probably climbed by around 9 per cent in 1997. Comprehensive Department of the Environment figures will not be published until well into the new year.
Halifax's new report says the idea there has been a boom is a misleading generalisation based on a few areas in London. "There has been no evidence in 1997 of any `ripple' effect away from London of this faster growth in house prices," it says.
"Sustainable, healthy recovery" is both its prognosis for the housing market in 1998 and its diagnosis for the past 12 months.
"No move back to housing boom and bust is likely," the report says. It adds: "If inflation in the economy generally remains at or around current levels, this 1960s pattern might well characterise the UK housing market not only in 1998 and 1999 but also for the early years of the new millennium." While Nationwide agrees that demand has weakened, it foresees a continuing recovery with a "ripple" out to other regions.
Aside from this disagreement, the pattern of the recovery so far is reasonably clear. As Halifax's report notes, home sales has been steady at around 120,000 a month.
The annual total of 1.45 million is well up from the 1995 low of 1.1 million but well below the peak of 1.7 million in the late 1980s. The recovery in the number of transactions has come about despite the fact mortgage rates have been rising since May.
Halifax's mortgage rate has climbed from 7.25 per cent at the start of 1997 to 8.7 per cent at the end of the year. Its 1998 forecasts are based on the assumption that the level of interest rates will rise by another half to three-quarters of a point.
Outlook, Page 23