UK house prices rose by 1.3% in January, the latest data from Halifax reveals- marking the fourth consecutive increase and the highest annual rise of 2.5% since January 2023.
This puts the average property price at £291,029, which is almost £4,000 more than the previous month.
The upward trend follows a six-month streak of falling house prices between April and September last year.
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The lender sees this as a ‘positive start to 2024’s housing market’ as competitive mortgage rates have returned, boosting confidence amongst buyers and sellers.
It comes as the Bank of England (BoE) held interest rates again at its latest MPC meeting at 5.25%, pushing some lenders to drop their mortgage rates.
Karen Noye, mortgage expert at Quilter, says: “This increase in house prices is a positive sign that the housing market is getting back on its feet, and it seems that the reduction in mortgage rates driven by a combination of competition between lenders and the pricing in of future Bank of England rate cuts lured in more buyers in the new year, feeding into the cautiously optimistic outlook for the housing market this year.”
That said, interest rates are still at a historic high compared to previous years which will impact buyer affordability, and this issue could linger for a while yet.
Kim Kinnaird, director at Halifax Mortgages looks to the future: “Affordability challenges are likely to remain and further modest falls should not be ruled out, against a backdrop of broader uncertainty in the economic environment.”
Where did house prices rise the most?
House prices grew the most in Northern Ireland by 5.3% annually. It means the average property price in the region is now £195,760- nearly £10,000 higher than a year ago.
Scotland and Wales join the hikes, with a 4% rise pushing average property prices in those areas to £206,087 and £219,609 respectively.
Although London only showed a 0.4% rise over the past year, as expected, it still comes out on top for the region with the highest house prices, with the average home selling just over the £500,000 mark.
Whilst the North West of the UK, Yorkshire and Humber, North East and the East Midlands recorded an upward trend in average annual property prices too, the South East of England saw the biggest fall.
House prices in the South East dropped 2.3%- an equivalent to around £8,800.
Where will house prices go in 2024?
Experts believe the housing market has ‘started with a bang’ in the new year as competitive mortgage rates and falling inflation (apart from last month’s surprise rise) mean potential home buyers are feeling more confident.
Plus, a flood of buyers and sellers are now entering the market in 2024 after holding off for a year due to economic uncertainty.
Tom Bill, head of UK residential research at Knight Frank said: “The number of new buyers registering and offers being submitted have increased since lenders dropped their prices last month, which suggests demand and activity levels will only get stronger, leading to a modest a single-digit price increase this year.”
Interest rate cuts expected later this year could also push for stronger buyer demand.
Despite a resilient start to the year though, some experts warn the good news might not last for the whole of 2024.
“January hasn’t altered the overall outlook for the property market, which is expected to hit tougher times later in 2024, as the overall economic picture weakens,” says Sarah Coles, head of personal finance, Hargreaves Lansdown.
“Prices are still expected to fall during the year. It means anyone buying and selling right now should focus on getting a good deal on a property they can comfortably afford and expect to be in for some time,” Coles advises.
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