The Halifax has said a further moderation in house price growth is likely next year, with house prices nationally expected to increase in a range of 3-5% in 2015.
The lender said the prospect of higher interest rates at some point in the year and the deterioration in affordability over the past year are expected to be key factors curbing housing demand.
However, housing demand should be supported by solid economic growth, higher employment, still low mortgage rates and the first gain in ‘real’ earnings for several years.
The Halifax expects to see a more even regional pattern in house price growth during 2015.
Martin Ellis, Halifax’s housing economist, said: “The fortunes of the housing market are closely tied to developments in the wider economy. The strengthening in the UK economy has contributed to higher housing demand over the past 18-24 months. There has been an increase in the number of buyers, fuelled by rising confidence and the improved cost and availability of credit. Higher demand, however, has not been matched by an increase in the number of sellers in the market, resulting in strong upward pressure on house prices in some parts of the UK.
“The deterioration in housing affordability as a result of higher house prices, earnings growth that has been consistently below consumer price inflation until very recently and increased talk of an interest rate rise, appear to have combined to temper housing demand since the summer. Tighter mortgage rules may also have acted as a brake on activity. The weakening in housing demand has led to a modest easing in both price growth and sales.
“House prices in the three months to October were 0.8% higher than in the preceding three months. This was the third consecutive decline in the quarterly rate of increase and the smallest rise since December 2012. Annual price growth in the three months to October slowed to 8.8% from 9.6% in September. Activity has also declined with mortgage approvals in September falling for the third successive month to a 14 month low, whilst home sales are at their lowest level since October 2013.”