House price increases not a turning point

The surprise rise in house prices in December indicated today (January 8th) by new figures from the Halifax should not be taken as a sign of a longer-term upward trend in prices.

That's the view of Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, who warned that, despite the figures revealing a 1.3 per cent rise in prices last month, the housing market was set to remain flat in the near future.

Re-iterating calls for a cut in interest rates when the Bank of England meets later this week, he also highlighted the importance of any rate changes being passed on to borrowers, and especially those looking to take out first-time buyer mortgages.

"It is premature to conclude that this is likely to mark a turning point in sentiment," Mr Rubinsohn said. "Our suspicion is that the market environment is likely to remain challenging for at the least the first half of this year and that activity levels will remain subdued."

"A keyissue for first-time buyers eager to take their first step onto the property market in this climate will be the willingness of lenders to provide finance on attractive terms," he claimed.

"The slippage in money market rates since the start of the new year suggests that there is more chance of further interest rates cuts being passed on more fully to borrowers but just as important will be the willingness of lenders to maintain loan to value ratios."

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