House prices are set to stagnate this year despite the influence of the Bank of England's Funding for Lending scheme, the lender Halifax said yesterday.
Despite a surprise monthly rise of 1.3 per cent in December, house prices are 0.3 per cent down on 2011 and likely to remain "broadly flat" in 2013 after a year which "lacked any real direction", according to the bank.
The pessimistic forecast comes despite approvals for lending to homebuyers climbing to a 10-month high in November. The Bank of England's recent credit conditions report also predicted "a significant increase" in the availability of finance to households and borrowers this year, in part driven by the FLS.
Halifax's economist Martin Ellis said: "Funding for Lending will be a positive but we do not think it will radically transform the market because of the other headwinds such as incomes struggling to match inflation and fears of unemployment." The average price of a UK house at £163,845 is 18 per cent below its August 2007 peak, although adjusted for rising inflation prices are more than 30 per cent down, according to Mr Ellis.
Capital Economics' Matthew Pointon said: "Improving the supply of mortgage finance will be of limited help if households are not able or willing to demand new loans. We expect unemployment to rise and real incomes to decline during 2013."
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