House price growth slows again as rate rise looms

Landlords looking to buy properties in the near future may find they need have little fear of soaring prices, but an interest rate rise is a likely prospect.

The latest Halifax House Price Index, covering the three months to January, revealed the average house price in this period was only 2.2 per cent up on a year earlier, lower than Consumer Price Index (CPI) inflation. This compared with 2.7 per cent in December 2017.

In addition, there was no change in average prices from three months earlier, compared with a 1.3 per cent rise in December. Just as these figures would suggest, the most recent monthly figures indicate a dip in prices, which were down 0.6 per cent in January after a 0.8 per cent fall in December.

That suggests landlords wishing to buy could soon get a bargain, whereas those keen to divest may find they have a decision to make. Selling now may mean a lower price than initially hoped, while hanging on to a home may be a long-term move, as prices could see a sustained drop or at least very low inflation. This will be particularly true if Brexit uncertainty has a severe downward impact on the economy.

Managing director of Halifax Community Bank Russell Galley said prices should hold up reasonably well in the coming months.

He commented: “Despite the recent rise in the Bank of England base rate, mortgage rates are still very low. This, combined with an ongoing acute shortage of properties for sale, will continue to underpin house prices over the coming months.”

However, the Bank may add another rate rise soon, hinting at this in the minutes of its latest Monetary Policy Committee meeting and the February Inflation Report.

Although the immediate decision has been a unanimous vote to hold rates, the minutes suggest ongoing concerns over CPI could prompt a rate rise soon.

It said that if the sustained pressures projected in the Inflation Report come to pass, monetary policy will need to be “tightened somewhat earlier and by a somewhat greater extent” than anticipated in the previous report in November.

All this would mean more expensive buy-to-let mortgages.