House prices are still rising across the country, says the UK's biggest mortgage lender and the housing market remained strong during January with prices increasing by 1.5%.

The increase pushed the average cost of a property up to £123,451, with prices for the three months to the end of January now 24.9% higher than they were during the same period the previous year shows Halifax’s report, published today.

Halifax’s Chief Economist, Martin Ellis said low interest rates and low unemployment were continuing to drive the market.

Details of the report:

• House prices increased by 1.5% in January, underlining that the market remains strong. This strength is confirmed by measures of housing market activity such as property transactions and mortgage approvals (see below).
• Affordability remains very good. With mortgage payments representing 15% of gross earnings for a typical new borrower, significantly below the long run average of 22% and bank base rates remaining at 4%, we are optimistic about the future prospects for the UK housing market. We expect annual house price growth in 2003 to be around 9%.
• An analysis of the housing market over the past 20 years - the period that the House Price Index has been in existence - demonstrates that unemployment, interest rates and affordability are the key drivers of the housing market. All three measures show that the UK housing market is in very good shape.
• Property transactions in England and Wales in December were 5% higher than a year ago on a seasonally adjusted basis, according to the Inland Revenue. This took the total for 2002 to 1.59 million sales, the highest since 1988. Halifax Estate Agents, one of the largest estate agency networks in the country, also reported increased property listings in January, particularly in the north.

Commenting on the figures Martin Ellis, Chief Economist, said:

"The housing market remains strong with prices rising by 1.5% in January. The factors that drove the market last year continue to be very much in place.”

“Mortgage rates are at their lowest level since the late 1950s. Unemployment too has continued to fall despite the relatively sluggish pace of overall economic activity. Transactions levels have also increased, particularly in the north of England.”

“Whilst the fundamental factors driving the housing market are set to remain supportive over the coming year, we still expect a gradual slowdown in house price growth.”

“The rising numbers of first-time buyers who are finding it more and more difficult to get on to the housing ladder will increasingly curb demand, causing house prices to rise more slowly. We expect annual house price inflation to slow from 26% in the last quarter of 2002 to 9% at the end of 2003."