Articles > Strong Start for Housing Market

January has seen a strengthening of the UK housing market, with prices rising 1.4% over the course of the month, the largest increase since July of 2004. This increase has pushed the average house price in the UK to over £158,000.

While the monthly increase isn’t far off that of July 2004, the annual inflation is no where near as strong as it was back then due to a relatively weak performance during the previous eleven months, with it sitting at 4.4% - substantially less than the 20+% seen during 2004. When you consider that in September this was at just 1.8% you can see that the last quarter of the year has seen quite a marked improvement in terms of the buoyancy of the housing market in general.

The reason behind the strong finish to the year can be largely attributed to the cut in interest rates made by the monetary policy committee in August, which took a month or two in order to filter down into the mortgage market and stimulate buyers to return. With only small movements in the prices, and with interest rates moving in the right direction, the overall confidence in the market rose as the fear of a crash in house prices lessened.

It is believed by many experts in the mortgage sector that the housing market will remain strong at least for the first half of the year, as this is generally the case following a rise in mortgage approvals – something that was seen during the latter half of last year.

While it does seem as though house prices are going to remain strong, it is not believed that the market will see large increases as the affordability of housing is still an issue, with the price rises seen during January already running above the headline earnings inflation. People are keen to buy in the current climate, which traditionally will cause prices to rise, however sellers are aware that the vast majority of buyers are already stretched financially to afford the purchase, and a rise could well move property out of reach and so demand would drop.