House prices reached a nine-month high in December, reaching £287,105, according to the Halifax house price index.
The average price of a home rose by 1.1 per cent last month, the third monthly consecutive rise and means house prices rose by 1.7 per cent, or £4,800, during 2023.
This beat previous expectations that house prices could fall by as much as 20 per cent over the course of last year.
One reason property transactions could be increasing is falling mortgage rates. Many lenders are now offering rates below 4 per cent for five-year fixes. At one stage last summer only 27 per cent of two-year fixes were below 6 per cent.
However, economic uncertainty and higher interest rates could drag down house prices by between 2-4 per cent this year, Halifax said.
Kim Kinnaird, director at Halifax Mortgages, said: “Whilst it’s encouraging that we saw growth in the last three months of the year, this was preceded with property price falls for six consecutive months between April and September.
“The growth we have seen is likely being driven by a shortage of properties on the market, rather than the strength of buyer demand. But with mortgage rates continuing to ease, we may see an increase in confidence from buyers over the coming months.”
Across all UK regions, house prices in Northern Ireland increased the most, by 4.1 per cent to £192,153, while Scotland saw property prices increase by 2.6 per cent to £205,170.
House prices in the South East of England fell most sharply, averaging £376,804, down 4.5 per cent or a drop of £17,755.
Ms Kinnaird added: “As we move through 2024, the UK property market will continue to reflect the wider economic uncertainty and buyers and sellers are likely to be naturally cautious when considering making a move.
“While wage growth is now above inflation, helping to ease cost of living pressures for some and improving housing affordability, interest rates are likely to remain elevated for as long as inflation remains markedly above the Bank of England’s target.”
Karen Noye, mortgage expert at Quilter, said house prices consistently defied expectations they would plummet throughout 2023.
“This uptick highlights just how resilient the housing market has been over the last year despite the volatility it has faced. As we look ahead to the rest of 2024, the housing market turmoil seen over the past couple of years is expected to dissipate further.
“Many lenders have been reducing their mortgage rates as swap rates have lowered, and lower transaction levels have prompted a healthy competition between lenders vying for business. This could lure prospective buyers back to the market and further prop up house prices.”
Figures from the Bank of England released this week showed a rise in net mortgage approvals for house purchases from 47,900 in October to 50,100 in November.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said the UK housing market saw a remarkably strong finish to the year.
“Increased competitiveness among lenders leads to lower mortgage rates and we find ourselves in the midst of a price war. With HSBC launching the headline-grabbing 3.94 per cent five-year fix and reductions from Halifax, NatWest, TSB and other lenders, the gloves really are off.
“With 2023 being a disappointing year in terms of amount of business done, lenders are keen to get this year off to a cracking start.”
