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UK house prices rise for third month as mortgage rates ease

House prices A sunset view of houses on a London street
Halifax predicts house prices to fall by between 2% and 4% this year but economists disagree. Photo: Getty (Karl Hendon via Getty Images)

Average UK house prices rose for the third straight month in December to their highest level since March 2023 as lower mortgage rates fuelled a revival in the property market.

The cost of an average home rose by 1.1% to £287,105, just over £3,000 more than in November and the highest level since March, Halifax said.

It was the third monthly gain in a row after six consecutive falls before that.

Property values increased by 1.7% on average across 2023, ending the year £4,800 higher than it had been at the end of 2022.

Kim Kinnaird, director at Halifax Mortgages, said: “The growth we have seen is likely being driven by a shortage of properties on the market, rather than the strength of buyer demand.

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“That said, with mortgage rates continuing to ease, we may see an increase in confidence from buyers over the coming months.”

Read more: How hard is it to get on the property ladder?

The average rate on a two-year fixed mortgage has fallen to its lowest level for nearly seven months. Financial information service Moneyfacts said the average rate had fallen from 5.92% to 5.87%.

The bounce back in house prices over the last three months comes as buyer confidence improves ahead of expected cuts to interest rates this year, according to mortgage brokers.

Sofia Jones, managing director at broker Penny House, said: “2023 was the most challenging year for borrowers that I have seen, with interest rates shooting up quickly.

“November and, to a greater extent December, saw confidence rebound sharply as mortgage rates came down in earnest.”

Despite the uptick, Halifax predicts house prices to fall by between 2% and 4% in 2024 as mortgage rates remain historically high.

Across all the UK regions, Northern Ireland recorded the strongest house price growth in 2023, as properties increased by 4.1% to £192,153.

Scotland saw property prices increase by 2.6% to £205,170. At the other end of the scale, the South East fell most sharply, houses there now average £376,804, a drop of £17,755, or 4.5%.

Read more: UK mortgage approvals rise as lenders cut rates

Anthony Codling, housing analyst at RBC Capital markets, is more bullish on the direction of travel for the property market this year.

He said: “Most, including us, thought house prices would fall during 2023, and most think they will fall in 2024, but not us.

“With rising wages, falling inflation, falling mortgage rates, and increasing talk of election related housing stimulus packages we expect house prices to rise in 2024. Our pessimism was misplaced in 2023, and we don’t want to make the same mistake twice.”

Halifax had predicted house prices would fall by 8% in 2023.

The consultancy Capital Economics expects prices to rise 3% over the final three months of this year, compared to the fourth quarter of 2024.

NatWest chairman says it’s not ‘that difficult’ to get on property ladder

Meanwhile, the chairman of NatWest has claimed it is “not that difficult” to get on the property ladder in the UK.

Howard Davies said that people “will have to save more”, but that “I don’t think it is that difficult at the moment”.

He told BBC Radio 4’s Today programme: “What we saw in the financial crisis was the risk of having people being able to borrow 100% in order to get onto the property ladder, and then suffering severe falls in the equity value of their houses, and having to leave and having a bad credit record.

First-time homebuyers typically needed to save a deposit of 20% to buy a home in 2022, according to the latest data from Statista.

Watch: Big differences in house prices changes across the UK

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