Thrifty Loans

Property values continue to flounder as annual house price inflation fell below 5% in January.

Figures from the Halifax indicate that there was no change in the value of house prices last month, the average remaining as £197,244. However, that meant that the annual rate fell to 4%, with houses worth on average £7,628 more than a year ago. Halifax announced December house price rise as a surprising 1.3% - which was later seasonally adjusted to 1.4% - but this has stalled in January.

House price inflation peaked at 11.4% in August, but now it is at its lowest since November 2005.

Despite some recent slippage, experts say that recent figures from Halifax and Nationwide indicate that the housing market is holding up.

Chief UK economist at analysts Global Insight, Howard Archer, said: “The Halifax and Nationwide data indicate that, while house prices are cooling significantly, they are not plunging through the floor. Nevertheless, the housing market is clearly buckling under substantial pressure from increased affordability constraints and tightening lending practices. Meanwhile, the fact that house prices did not plunge in January reinforces belief that the Bank of England will limit a widely expected interest rate cut on Thursday to 25 basis points from 5.50% to 5.25%. Still-significant inflationary pressures are limiting the scope for aggressive Bank of England action on Thursday.”

Halifax is forecasting property prices to remain flat throughout 2008, but the three months to January have shown a 1% fall.

Martin Ellis, chief economist at Halifax, said on Tuesday: “We expect sound economic fundamentals and lower interest rates to support house prices. The economy is expected to continue expanding during 2008, albeit at a slower pace than in the past two years. Sustained growth should support a strong labour market. The MPC is likely to cut the bank rate at least twice in 2008, further supporting both the economy and housing demand.”