The Halifax has warned that house prices will continue to rise strongly after the Bank of England reported that homebuyers are taking advantage of record low interest rates to secure mortgages.
Britain’s biggest mortgage lender said on Tuesday that house prices rose by 1.4% in the past three months and by 9% at an annual rate, despite a small 0.2% fall in November alone.
Martin Ellis, Halifax housing economist, said: “Solid economic growth, rising real earnings and falls in already very low mortgage rates have combined to stimulate housing demand this year.
“The increasingly acute imbalance between supply and demand is causing prices to rise at a robust pace. A situation that is unlikely to reverse significantly in the short term.”
His comments came as the Bank of England released its latest snapshot of the mortgage market. It showed that the overall average interest rate on gross advances had fallen to its lowest level since comparable records began in 2007. The rate dropped by 0.07 percentage points in the third quarter to 2.76%.
Borrowing rates have been edged down by lower-than-expected inflation, which has put back the expected timing of a rise in interest rates by the Bank, and strong competition for home loan business from lenders.
The Bank said gross mortgage advances stood at £62.1bn in the third quarter of 2015 – up 18% on the previous three months and up 11% on the third quarter of 2014.
Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), said borrowers were eager to take advantage of the deals on offer. “There was a significant increase in mortgage activity in the third quarter of 2015. This spike in demand has been driven by record low mortgage rates – a result of increased lender competition and the continually low base rate.
“More and more borrowers have been fixing their rates in order to secure the best possible deals, with the proportion opting to fix climbing above the 80% mark for the first time this year. Such attractively priced rates won’t be around forever, but those in a position to take on a long-term fix will benefit from a longer period of savings.”
The 0.2% fall in house prices reported by the Halifax followed a 1% increase in October. The lender said that the annual rate of growth had fallen from 9.7% the previous month but remained within the narrow price range seen during 2015. Supply of properties was at a record low, it added.