UK house prices unexpectedly dip in February, Halifax data shows

LONDON (Reuters) -House prices in Britain unexpectedly fell in February as demand faded from buyers who were rushing to purchase homes before the end of tax incentives on March 31, mortgage lender Halifax said on Friday.

House prices slipped 0.1% month-on-month in February, after rising by a revised 0.6% in January, and were below all forecasts in a Reuters poll of economists. Both monthly and annual data for January were revised slightly lower.

"February's figures highlight the delicate balance within the UK housing market," Amanda Bryden, head of mortgages at Halifax, said.

"While there’s been talk of a last minute rush on new mortgages ahead of the changes to stamp duty, inevitably we’ve seen some of the demand that was brought forward start to fade as the April deadline ticks closer, given the time needed to complete a purchase."

Some recent measures of Britain's property sector have shown a pick-up in demand at the start of the year, helped by lower borrowing costs and the expiry at the end of this month of temporary tax incentives for buyers of less expensive homes as well as for first-time buyers.

Figures from the Bank of England, published on Monday, showed that net mortgage lending in January rose by the most since September 2022. The central bank is expected to hold interest rates at 4.5% later this month, and investors are pricing in around two further quarter-point cuts in interest rates over the remainder of this year.

Halifax's gauge of house prices compared with a year earlier was 2.9% higher, the same rate as in January, and slightly below economists' forecast of a 3.1% rise.

In contrast, rival lender Nationwide said house prices were up 3.9% on an annual basis, and rose 0.4% in February.

Bryden said she expected house prices would continue to rise, albeit at a slower pace than 2024 due to persistent affordability challenges.

A Reuters poll published last month showed economists expected British house prices to rise by 3.5% this year and 4% in 2026.

(Reporting by Suban Abdulla, editing by William James and Susan Fenton)