The UK’s largest mortgage lender, Halifax, has reported a continuous rise in house prices for the past three months. In December, there was a 1.1% increase, following a 0.6% rise in November and a 1.2% hike in October. As a result, the average UK home now stands at a value of £287,105, which is £3,000 more than the previous month.

Interestingly, this upward trend in housing prices isn’t due to increasing buyer demand. Instead, it’s attributed to a scarcity of properties available on the market. According to Halifax, this shortage has been the primary driver behind the growth rates observed monthly, quarterly, and annually.

Kim Kinnaird, the director of Halifax Mortgages, suggests that with mortgage rates easing up, we could witness a boost in buyer confidence soon. This optimism comes despite the forecast of a potential drop in house prices.

The First Annual Growth in Eight Months

For the first time in eight months, Halifax has reported an annual growth in the UK housing market. December saw a 1.7% increase compared to the same month last year. Marc von Grundherr, from Benham and Reeves, even referred to this as a “Christmas miracle,” considering the tumultuous nature of 2023.

The Bank of England’s recent figures reveal a rise in mortgage approvals for house purchases, suggesting an uptick in demand. Approvals increased from 47,900 in October to 50,100 in November.

Looming Challenges for Homeowners

Despite these positive signs, the future holds significant challenges. Goldman Sachs analysts predict that UK homeowners could face a staggering £19 billion increase in mortgage costs by the end of next year. This spike will be driven by the expiry of numerous fixed-rate deals, adding to the already strained household finances.

A Predicted Decline in Prices

Halifax anticipates a decrease in house prices by up to 4% in 2024. Even with major lenders slashing mortgage rates in the new year, high interest rates and inflation are expected to make mortgages less affordable.

The overall uncertainty in the economy is likely to reflect in the property market. Buyers and sellers are expected to tread cautiously. Although wage growth is outpacing inflation, which is a positive sign for household finances, interest rates are predicted to stay high as long as inflation remains significantly above the Bank of England’s target.

The south-east of England is facing the most significant downward pressure on house prices, with an average drop of 4.5% over the last year.