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British households are still confident about the outlook for house price growth even although there has been a sharp increase in the proportion of who are expecting an interest rate rise in the next 12 months.

Continued talk over the likely timing of an interest rate rise has seen a spike in the number of people who expect both mortgage and savings rates to be higher in 12 months’ time, according to the quarterly Halifax Housing Market Confidence Tracker report.

The data shows that 58% now believe mortgage interest rates will be higher in 12 months compared to 48% the second quarter of the year and 35% expect savings interest rates will be higher, up from 26% in the previous quarter.

Alongside annual house price inflation running at 9% and the average house price standing at £204,674, house price optimism remains high at +63 in the third quarter compared to +64 in the second quarter with 68% now expecting the average property prices to be higher in 12 months’ time and just 5% expecting it to be lower.

The figures from the report also shows that there has been a further fall in the proportion of who think it will be a good time to buy in 12 months’ time, from 56% in the second quarter to 53% in the third quarter.

But despite the apparent stability in house price expectations, there has also been a drop in selling sentiment, with the proportion who believe the next 12 months will be a good time to sell, falling seven percentage points to 52% from 59% in the second quarter. This brings positive selling sentiment back down to the levels seen in early 2015 and it is now at its lowest level for a year.

Regionally, lower levels of people in London report a positive buying sentiment as just 40% said they thought the next 12 months would be a good time buy compared to Scotland at 77% and the North of England at 58%.

Conversely, in terms of positive selling sentiment, London sees 64% saying ‘the next 12 months will be a good time sell, compared to 48% in Scotland, 47% in the North of England and 43% in the Midlands. 

‘While economic optimism appears to have tailed off in the last quarter, house prices have continued to increase and the underlying pace of house price growth is strong. This has helped to maintain the expectation that house prices will continue to rise, despite more people expecting interest rate rises in the next 12 months,’ said Craig McKinlay, Halifax mortgage director.

‘The factors behind the upward pressure on house prices include the continued lack of second-hand properties for sale on the market and the availability of low mortgage rates. Without an increase in supply it’s likely to mean that house price growth continues to be robust in the short term, even if interest rates eventually begin to increase,’ he added.

The research also found that raising a deposit is still seen as the number one barrier to buying property with 57% mentioning this, despite the availability of higher loan to value mortgages and the Help to Buy Scheme.

The number of people citing job security as a barrier has fallen to its lowest ever level at 42% but it is still the second most mentioned factor, ahead of household finances at 36%. Despite the continued rise in house prices, the percentage citing rising prices or prices being too high has fallen from 35% to 31% in the last three months.

And despite the swing in terms of people expecting to see an interest rate rise in the next 12 months, the percentage of people who cite concerns about interest rates rises as a barrier is little changed, currently 14% compared to 16% in the second quarter of the year.

www.propertywire.com