Home prices rise the most in a year in January, Halifax says

House prices rose at the highest rate in a year in January as mortgage rates continued to ease, Halifax said.

Slower inflation and a booming job market also contributed to the rise in property prices, it added.

The UK's biggest mortgage lender said the price of a typical home now averages £291,029, up 2.5% from January 2023.

The figures were announced after leading housebuilder Barratt announced it would buy rival Redrow in a deal worth £2.5bn.

Home builders have struggled in recent years as rising interest rates have depressed demand and raised construction costs.

However, he warned that although house prices had risen, interest rates remained high compared to recent historic lows, making borrowing more expensive for potential buyers.

According to lenders, first-time buyers pay an average deposit of £53,414.

“It's no surprise that almost two-thirds of new buyers stepping onto the ladder are buying in joint names,” said Kim Kinnaird, a director at Halifax Mortgages.

Kinnaird said that “affordability challenges are likely to remain” in the coming months, adding: “Further declines in house prices should not be ruled out against a backdrop of widespread uncertainty in the economic environment. ” he said.

Halifax home price data is based on proprietary mortgage financing and does not include cash buyers or sales transactions. Cash buyers account for about one-third of home sales.

First-time buyers and homeowners looking to refinance their property have recently faced rising borrowing costs. The Bank of England has kept interest rates at a 16-year high of 5.25% since August 2023 in a bid to slow the rapid pace of general price rises.

Alice Hayne, a personal finance analyst at BestInvest, said inflation was expected to slow in the coming months and the central bank could cut interest rates as early as the summer.

“The improved outlook has improved mortgage rates and affordability levels for first-time home buyers and those looking to refinance,” he said.

The typical two-year fixed mortgage rate was 5.57% as of Tuesday, while the rate for a five-year contract was 5.22%, according to Money Facts data.

This is down from the peak of 6.86% for two-year contracts in July last year.

Barratt chief executive David Thomas said demand for the company's homes was “strong” despite the “challenging” economic environment.

His comments came after Barratt, Britain's largest housebuilder, announced it would acquire Redrow in an all-stock deal. The new company, to be renamed Barratt Redrow, aims to build more than 22,000 homes each year in the medium term.

Mr Thomas added: “Since the beginning of January, we have seen early signs of improvement in both booking rates and buyer sentiment, supported by expectations of lower interest rates and the introduction of more competitive mortgage rates.” .

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the decision behind the merger was because the two companies believed they were “stronger together”, with both companies having access to more capital. It added that it would have “much more leverage” to take advantage of procurement needs. British housing.