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House prices move on in January

Halifax says January saw a 0.6% rise in house prices, but the three-month and year-on-year figures showed a 0.9% and 1.8% decline respectively

House prices in England and Wales rose by 0.6% in January, according to Halifax, but the lender said low interest rates has led to little movement in prices for eight months.

The average price of a home fell by 0.9% over a rolling three-month period as the Bank of England held interest rates at a record low of 0.5%, supporting demand for housing, and was down by 1.8% year-on-year. The average price of a house in January was £160,907.

Earlier this month rival lender Nationwide reported that prices dropped by 0.2% in January, but were up by 0.6% year-on-year. It put the average price of a UK house at £162,228 and suggested house prices would move “sideways or only modestly lower in the months ahead”.

Interest rates have seen mortgage payments fall to their lowest level as a proportion of household earnings for a new borrower for 14 years, Halifax said. Martin Ellis, housing economist at the lender, said: “If the UK can avoid a prolonged recession we expect broad stability in house prices in 2012.”

Prospects for house prices over the coming months will depend on events in the eurozone and the repercussions of developments there for the UK economy, Halifax added.

The figures come as the industry-wide number of mortgages approved to finance house purchase – a leading indicator of completed house sales – held steady at approximately 53,000 for the third successive month in December 2011, according to the Bank of England.

Overall, approvals in the final three months of 2011 were 3% higher than in the previous quarter and 16% higher than in the same period of 2010. Housing demand may have been helped by a slight improvement in the number of people in employment in the three months to November 2011, which was 18,000 higher than in the preceding three months.

Elsewhere, Halifax said typical mortgage payments for a new borrower – both first-time buyers and home movers – at the long-term average loan-to-value ratio stood at 27% of disposable earnings in the fourth quarter of 2011. This was well below the average of 37% recorded over the past 27 years.

Howard Archer, economist at IHS Global Insight, said the monthly increase in January did not alter his view that house prices were likely to decline by 5% this year. He said: “We suspect that low wage growth, rising unemployment and persistent concerns over the economic situation and outlook will limit potential buyers and weigh down on house prices.”

Tracy Kellett, managing director of estate agent BDI Home Finders, added: “The quarterly change of -0.9% is a more accurate description of where the market is at than January’s 0.6% rise. The lack of transactions and activity generally can easily exaggerate an individual month’s figures.

“House prices are being held artificially high by two key factors: an extreme lack of stock and historically low interest rates. Throughout 2012 we are likely to see a further widening of the north/south divide. Prices will be hit hardest where the economy is feeling it the hardest.” © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds