The 'brakes will be put on house prices next year' as interest rate rises begin, nation's biggest mortgage lender warns
12-06-2015
- Average price of a home will rise by between 4% and 6%
- Values increased by £18,000 this year to reach £205,240
- Interest rate rises expected to be introduced later next year
By Myra Butterworth For Mailonline
The brakes will be put on house prices rises next year as interest rate rises begin, the country's biggest mortgage lender has warned.
The average value of a home in Britain currently stands at £205,240, having risen by more than £18,000 in the past year, according to Halifax. But these latest increases are not expected to continue amid Bank of England monetary tightening and affordability constraints.
The lender said typical values would be 4 and 6 per cent higher by the end of 2016.
Average house prices are predicted to be between 4 and 6 per cent higher by the end of 2016.
The Bank of England is widely expected to increase interest rates in the second half of next year from their historically low level of just 0.5 per cent.
It means those borrowers on their lenders standard variable rate will see an immediate increase in their monthly mortgage costs, along with those with tracker mortgages.
Halifax's housing economist, Martin Ellis, said: 'It is increasingly difficult to get on the housing ladder. This ongoing development, combined with the growing prospect of an interest rate rise, should start to put the brakes on house price growth during the course of 2016. Interest rate movements are likely to have a significant bearing on house prices developments in 2016 and beyond.'
However, he added that interest rates will rise at a gradual pace.
He said: 'When the time finally comes for the first rise in official interest rates, the Bank of England is likely to adopt a cautious approach to raising rates due to concerns about households' ability to make higher repayments on their debts.'
Average house prices are predicted to be between 4 and 6 per cent higher by the end of 2016.
| Year | Monthly % Change | Price |
|---|---|---|
| 2006 | 1.6 | £184,765 |
| 2007 | -0.4 | £197,698 |
| 2008 | -2.2 | £168,112 |
| 2009 | 1.0 | £164,990 |
| 2010 | 1.2 | £164,320 |
| 2011 | 1.0 | £162,923 |
| 2012 | -0.6 | £159,157 |
| 2013 | 1.2 | £172,959 |
| 2014 | -0.3 | £186,469 |
| 2015 | 1.1 | £205,240 |
| Source: Halifax |
The prediction follows the Government's announcement that stamp duty will increase next year for buy-to-let investors.
Alex Gosling, chief executive of HouseSimple.com, said: 'The Chancellor's Autumn Statement recent announcement on buy-to-let stamp duty changes could actually push prices higher in the first quarter of 2016, as investors look to buy before the new rates coming into force.
'But after April, price growth could start to cool off with investor appetite dampened by higher stamp duty taxes, issues over affordability and the prospect of interest rate rises.
'There is still a supply issue across the country, and that has been a major factor in house price growth continuing on its upward trajectory. However, if buy to let investors start to desert the the market, and new property listings start to rise, we may see supply more aligned with demand, and that could ease the pressure on prices.'