House price growth points to continued confidence

Last month's quarter point rise in interest rates has done little to dampen housing market confidence, though house price growth is showing signs of stalling, according to Halifax, Britain's biggest mortgage lender.

The latest monthly Halifax house price index shows average property values increased by 1% in November, the lowest rate of growth for five months.

Annual house price inflation was also down with the price of the average property 14.1% higher than in November 2002, compared to the 16.7% year-on-year rise in October.

Martin Ellis, chief economist at Halifax, said the figures indicate market stability and that the level of growth is moving closer to long term average increases of 8%. The average house price stands at £139,405.

"The gradual easing in house price growth reflects a market returning to average house price rises after two years of exceptional increases."

Halifax said the Bank of England base rate rise had been offset by favourable underlying economic conditions and that record low mortgage rates and continuing high employment levels were also contributing to buyer confidence.

In a separate piece of research, the mortgage lender found that at the higher end of the housing market, regions outside the capital are continuing to catch up. In the first half of 2003, for the first time, nine areas outside London and the south-east recorded transactions above £1m; 12,000 properties have been sold for more than £1m since 1995, the study found.

Despite the positive tone from Halifax, some economists remain concerned that consumers who have taken on a record amount of mortgage debt could find themselves in financial difficulty if there is a change in their circumstances.

Halifax brushed aside the worries saying affordability of properties remains good. The average home owner pays 13.6% of income after tax on mortgage payments, a spokesman said. This compares with an average of 21% over the last 20 years and a peak of more than 36% in 1990 at the end of the last property boom.

"For mortgage payments to equal the long term average, bank base rates would have to rise to 6.25% - and for them to reach the peak of 36%, bank base rates would need to rise to 10%," the spokesman said.

House prices are expected to grow by 10% in 2004.