UK House Prices Experience Largest Monthly Increase Since November 2024

UK Housing Market Recovery

By Suban Abdulla

Monthly and Annual Price Changes

LONDON, Feb 5 (Reuters) - British house prices rose by the most in more than a year in January, mortgage lender Halifax said on Friday, adding to signs of a recovery in the housing market after finance minister Rachel Reeves' budget in late November.

Factors Influencing the Market

The 0.7% month-on-month increase was the biggest since November 2024, following a 0.5% fall in prices in December.

Future Price Predictions

Compared to a year ago, house prices rose by 1.0%, speeding up from December's 0.4% growth and taking the average cost of property prices above 300,000 pounds ($407,000) for the first time, Halifax said.

"While that's undoubtedly a milestone figure, and activity levels show a resilient market, affordability remains a challenge for many would-be buyers," Amanda Bryden, Halifax's head of mortgages, said.

But Bryden said the sector was showing signs of improvement, and further easing in inflation could lead to gradual reductions in mortgage costs.

"Wage growth has been outpacing property price inflation since late 2022, steadily improving underlying affordability. That’s a positive trend for buyers, and the long-term health of the market," she said.

Another lender Nationwide said on Monday its measure of house prices rose by 1.0% in annual terms in January while its estimate of monthly house prices grew 0.3%.

The Royal Institution of Chartered Surveyors said last month that the housing market showed some signs of turning a corner as uncertainty about Reeves' budget and her tax plans lifted.

However, Bank of England data has shown that the number of mortgages approved by lenders - a leading indicator for house purchases - fell in December to its lowest since June 2024.

The central bank held interest rates at 3.75% on Thursday but signalled further reductions ahead if an expected fall in inflation looks like it will last. Investors are almost fully pricing in two more quarter-point rate cuts in 2026.

Halifax said it continued to expect annual house price growth of 1-3% this year.

Ashley Webb, UK economist at Capital Economics, said they he expected prices to rise by 3.5% by the end of 2026.

But he said there was a risk that the housing market could be hurt by political instability as Prime Minister Keir Starmer faces criticism within his Labour Party from the fallout of his former U.S. envoy Peter Mandelson's ties to Jeffrey Epstein.

"If Starmer and/or Reeves were to be replaced by a less fiscally responsible top team, a possible rise in gilt yields may mean mortgage rates fall by less and house price growth is softer than we expect," Webb said.

($1 = 0.7372 pounds)

(Reporting by Suban Abdulla; Editing by Kate Holton, William Maclean)