According to the figures, this was the strongest annual growth rate for a year, adding to tentative signs of momentum in the housing market.
In month-on-month terms, house prices are up 1.3% – the fourth consecutive increase and the largest monthly gain since June 2022.
Kim Kinnaird, director of mortgages at Halifax, said a recent drop in mortgage rates, falling inflation and a resilient labour market had boosted confidence among buyers and sellers in early 2024.
“Affordability challenges are likely to remain and further modest falls should not be ruled out, against a backdrop of broader uncertainty in the economic environment,” she said.
Tom Bill, head of UK residential research at Knight Frank, said: “After suffering the effects of 14 consecutive rate rises last year, house prices are getting stronger as multiple interest rate cuts are expected in 2024. The number of new buyers registering and offers being submitted have increased since lenders dropped their prices last month, which suggests demand and activity levels will only get stronger, leading to a modest a single-digit price increase this year.”
Matt Thompson, head of sales at Chestertons, commented: “The gradual introduction of more attractive mortgage products boosted buyer confidence in January, resulting in more buyers entering the market. This increase in activity was further driven by pent-up demand from house hunters who were unable to find a property last year. Sellers also feel more confident about attracting the right buyer for their home which led to a slight increase in the number of properties being put up for sale in January.”
Verona Frankish, CEO of Yopa, said: “Not only have we seen positive market movement with respect to the monthly rate of house price growth in recent months, but we’re now starting to see an improvement with respect to the annual picture and it’s this measure of health that suggests the market is firmly on the up.
“Looking ahead, it’s likely that not only has the property market bottomed out with respect to the decline in house prices seen last year, but it’s also likely that interest rates have now peaked.
“This combination of factors will enthuse both buyer and sellers in equal measure and as the year progresses, we expect further momentum to build.”
Iain McKenzie, CEO of The Guild of Property Professionals, commented: “This is our first indicator for how 2024 will play out for the property industry and all signs point to a healthy start.
“A monthly increase of over 1% in house prices will be welcome news to homeowners who are considering selling their property this year.
“While prospective buyers will be hoping for a greater adjustment in prices, they should also feel reassured by a robust market, as it means their home is more likely to hold its value after they’ve already agreed to purchase.
“Estate agents are seeing that the demand for quality housing remains as robust as ever. Millions of first-time buyers are currently trapped in a rental market which is becoming increasingly unaffordable, especially in the bigger cities.
“Interest rates are holding steady, which is giving lenders the motivation to approve more mortgage enquiries. This is welcome news to the industry and we should see sales pick up this year too.
“If you are looking at marketing your property this year, your local estate agent is likely to have the best idea of prices in your part of the country. We have seen such wildly different trends across the UK over the past year, so a local perspective is crucial in securing the best price possible.”
Guy Gittins, CEO of Foxtons, commented: “Interest rates being held at 5.25% since September 2023 has helped to both steady and stimulate the UK property market, with buyers reacting positively to a greater degree of economic stability and a reduction in mortgage rates. Since the start of the year, weekly mortgage referrals to our mortgage broker, Alexander Hall, have been higher than any weekly level seen throughout 2023.
“This has led to an improvement in mortgage approval numbers in recent months as buyers have acted with urgency to secure these lower rates while they last, while also taking advantage of their improved position in the market with respect to their purchasing power.
“In turn, this has caused mortgage approved house prices to increase and today’s figures from Halifax provide further evidence of this growing market momentum.
“However, it’s important to note that interest rates remain at 5.25% and there is no guarantee of when this will change.
“In the meantime, those looking to purchase with the help of a mortgage are best advised to do so with the support of an experienced mortgage broker to ensure they secure the best available rates and avoid overpaying on their monthly repayments.”
Simon Gerrard, MD of Martyn Gerrard, said: “The figures line up with what we’re really seeing on the ground in the housing market – last year, a lot of people put their property searches on hold to weather wider economic turbulence. Now, however, the economy has started to stabilise, and it’s encouraging that large lenders are responding the right way to inflation coming under control by bringing down interest rates.
“Though the Bank of England held the base interest rate at their latest meeting, it has started sending signals that it may start lowering them soon. This will likely be done with caution, and rates will only drop in small increments, but it could nonetheless be a real watershed moment for the housing market, prompting a groundswell of home buying activity.
“Whilst affordability of homes at this moment is quite good, a quickly increasing population and total lack of new housing supply means prices will then start to rise sharply, particularly in London. Unfortunately, the dearth of new home building is unlikely to change anytime soon. Rising prices may sound like welcome news for present homeowners, but many may find themselves unable to move up the property ladder when purchasing their next home.
“Overall, I would argue that we’re in a brief transition window where house prices perhaps haven’t yet fully responded to changes in mortgage rates, meaning that people are able to secure better terms to finance the purchase of a new home whilst prices are still relatively low. This window won’t last long, especially once the base rate drops, so people looking to buy a home would do well to start positioning themselves to progress their property search sooner rather than later. For sellers, the figures today really highlight the need for a trusted property adviser who knows the market well to avoid settling for well below asking price.”
Jason Tebb, president of OnTheMarket, commented: “Growing optimism has been in evidence since the turn of the year, with an increase in enquiries as falling mortgage rates encourage buyers and sellers who may have been holding off to take action.
“With property prices ticking up again month-on-month, it may be tempting to conclude that buyers will pay more but stretched affordability remains an issue for many.
“The housing market has got off to an encouraging start but rates are still considerably higher than they were during the pandemic and buyers remain sensitive on price. Sellers who take this into consideration and price sensibly, taking advice from experienced local agents, are finding motivated and committed buyers.”