According to a recent Halifax index, housing prices increased in December 2007 after the previous three consecutive months of falling prices. The index said that prices increased by 1.3 percent even though they were forecasted to decrease by a half percent. In addition, the Halifax index said that housing prices increased by 5.2 percent in 2007, which is well below the long time average 8 percent annual increase seen in past years.
Unfortunately for prospective UK home buyers, the Halifax index findings are atypical of what other institutions found to be true for December. Most other analyses said that housing prices decreased and that the number of mortgage approvals also decreased in December.
The index is volatile, and Halifax said that it is common in a subdued market for there to be a mixed pattern of rises and falls in monthly housing prices.
While interest rates decreased this past December, property economist at Capital Economics, Ed Stanfield, said that it is probable that people will relate the December interest rate decrease with the Halifax findings that housing prices increased. However, it is "unlikely that the cut had such a pronounced and rapid impact, especially as not all lenders have passed [the interest rate cut] on to borrowers."
BNP Paribas economist Alan Clarke said, "With buyer traffic and mortgage approvals down sharply and buyers as eager to buy a house as they are to catch a falling knife, this is probably a blip in an otherwise downward trend."
There is much speculation that the Bank of England (BoE) will be lowering interest rates in the coming months in order to boost consumer activity, but analysts believe that the BoE will wait until February when it has updated its own economic outlook with the new inflation report.
Chancellor Alistair Darling said the BoE has "room to manoeuvre" with interest rates and that when it does decide to lower rates, consumers will expect lenders to pass the decrease on to them.
During the five months proceeding November 2007, with consumers eagerly awaiting the projected rate cuts, there was a marked decrease in borrower interest in fixed rate mortgages. Consumers want to be ready to take advantage of the lower rates when they are released by the BoE.