Halifax: House prices to rise 3%

HBoS predicts house prices will rise 3% in 2006

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Wednesday, 21, Dec 2005 04:49

Halifax Bank of Scotland (HBoS) has predicted that house prices will rise just three per cent next year.

HBoS, the UK's largest mortgage provider, points out that in 2005 house prices rose less than the long-term average (of eight per cent) for the first time since 2000.

But this sort of growth could become in the norm in the years to come.

"The UK housing market is set for a period of broad stability with house prices forecast to rise by three per cent, broadly in line with the predicted rise in retail price inflation. Low, single digit growth is expected to be the norm across most of the country," said Martin Ellis, HBoS chief economist.

This is due to a broad balance between factors keeping house prices high, and those stopping it growing much further.

The bank points out that continuing economic growth and high levels of employment, coupled with rising wages, underpin the market. Additionally, it predicts that interest rates will fall in 2006.

However, high council tax and utility bills are set to put pressure on household finances and wipe out any benefit from potentially lower mortgage rates.

"The cost of owning a home will increase, driven, in particular, by bigger council tax and utility bills. Non-mortgage related housing bills could account for 70 per cent of the cost of owning a home next year," Mr Ellis explained.

"Continuing economic growth, the high level of employment, robust earnings increases and the prospect of further interest rate cuts will support housing demand during the coming year."

Regionally, HBoS predicts that the difference in prices between different areas of the country is likely to reduce, but there are still bargains to be found.

Towns with house prices lower than the regional averages are the ones most likely to see price rises, with HBoS highlighting Clydebank, Renfrew, Airdrie and Wishaw (all in Strathclyde) and Nelson and Burnley in the North West.

To find a cheap UK mortgage, go to www.myfinances.co.uk/mortgages.htm