House prices rose for the seventh month running in August and are set to continue increasing “gradually” for the rest of the year, Halifax, the UK’s biggest mortgage lender, said today.
The Lloyds Banking Group offshoot said the annual rise in house prices of 5.4% was the highest rate since June 2010 and compares with just 1.1% in March this year.
Halifax housing economist Martin Ellis said: “Economic improvement and low interest rates, supported by official schemes such as Funding for Lending and Help to Buy, appear to have boosted housing demand in recent months. Nonetheless, relatively modest economic growth and below-inflation rises in earnings are likely to act as a brake on the market. Overall, house prices are expected to rise gradually over the remainder of the year.”
The average price of a house across the country is now £170,231.
Chancellor George Osborne’s Help to Buy scheme began in April and its second phase, which includes state-backed mortgage guarantees, is due to come in next January.
Housebuilders have already reported a strong rise in demand for newly built homes under the first phase of the scheme.
Ellis said: “Housing market activity is also on an upward trend with the number of mortgage approvals for house purchases — a leading indicator of completed house sales — 10% higher in the three months to July compared with the previous quarter after allowing for seasonal influences.”
According to LSL Property Services, the number of first-time buyers has risen by 45% over the last 12 months. Howard Archer, chief economist at Global Insight, agrees with Halifax that house prices will increase gradually in the final months of the year but warns there may be risks ahead.
He said: “There is a mounting danger that house prices could really take off further out, especially as a shortage of new properties for sale could be a significant factor in some areas, notably London and the South East. While an improving housing market is helpful to growth prospects, it is vitally important for stability and longer-term growth prospects that a new housing price bubble does not emerge.
“Should the housing market gain substantial momentum over the coming months, the case for limiting or even eventually pulling the plug on the Help to Buy mortgage guarantee scheme that is due to start in 2014 will look ever more compelling, even if the Government may find this politically difficult to do.”
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