Increases in mortgage rates have failed to stop house price rises which went up by 1.6 per cent in February, with an annual house price inflation figure of 17.8 per cent, according to Halifax research.
The two Bank of England base rate rises since last November have had a modest affect on housing affordability, raising mortgage payments as a percentage of earnings from 13.9 per cent to 15.5 per cent, but Halifax says that figure is well below the long-term average of 21 per cent. The average house price is now £125,000.
The research shows that the Government's failure to increase tax thresholds in line with house price inflation has increased the number of properties worth more than the inheritance tax threshold of £255,000 by 25 per cent from 1.55 million in the last 12 months to 1.94 million.
Inland Revenue figures show transactions in England and Wales rose by 5 per cent from 105,000 last December to 110,000 in January. Transactions in the three months to January were 1 per cent higher than in the preceding three months, suggesting that the level of activity in the housing market is rising following a 16 per cent fall in 2003.
Halifax general manager (group economics) Shane O'Riordain says: “The strength of the housing market is underpinned by the strong labour market, historically low interest rates and low mortgage payments in relation to earnings.”