First house price rise for 2 years

British house prices dipped in January compared to the month before but posted their first annual rise in more than two years, helped by a central bank scheme aimed at boosting lending, according to Halifax.

The mortgage lender said prices dropped 0.2% month on month. However, prices in the three months to January were 1.3% higher than a year ago. That was the first such rise since October 2010.

"The Funding for Lending scheme has helped lenders to lower interest rates and improve availability in the past few months," Halifax economist Martin Ellis said. "This is likely to have been a factor contributing to the pick-up in both home sales and prices."

But he added that sluggish economic growth and pressures on household finances were expected to constrain demand for housing in coming months.

"Overall, we expect continuing broad stability in house prices nationally in 2013," he said.

Jonathan Hopper, managing director of the property search consultants Garrington, commented:

“What began as a slight thaw is beginning to feel like the first flickers of warmth… Clearly one swallow does not a summer make, but the property market is going into 2013 with a spring in its step.

“Underpinning that unpredictable picture are two conflicting forces. The Funding for Lending Scheme is tempting more would-be buyers to take the plunge as lenders are not just cutting rates, but offering more products too - even the high LTV loans they had shunned for so long.

“But with the economy shrinking again, consumer confidence is still in short supply. That’s why buyers are negotiating hard, and outside the hotspots of London and the Southeast, prices will be slow to rise.”

Ben Thompson, managing director  of Legal & General Mortgage Club, added: "This isn’t something that can be transformed overnight. So whilst we are moving in the right direction, all indicators point to full recovery being a fairly long process."

Source: Reuters.