UK house prices see ‘fastest growth in five years’

British house prices jumped sharply in February, rising at the fastest monthly pace since May 2009, mortgage lender Halifax reported today.

Halifax said house prices rose 2.4 per cent in February compared with a 1.1 per cent rise in January, far outstripping a Reuters poll consensus for a 0.7 per cent gain.

House prices in the three months to January were 7.9 per cent higher than a year earlier, compared with 7.2 per cent in January.

Halifax said an improved economic outlook, falling unemployment and better confidence had boosted demand, but pressure on household finances and below-inflation growth in earnings would constrain the rise of house prices.

“While the strength of house prices is not yet a serious concern outside of London, it is something that needs to be closely monitored given that a number of recent data and surveys have indicated that the strength in house prices is becoming more widespread,” said Howard Archer, economist at IHS Global Insight.

He expects house prices will rise around 8 per cent in 2014, but added that Thursday’s survey suggests that could be a conservative forecast.

A survey from mortgage lender Nationwide last Friday showed the rate of house price growth slowed in February, in contrast with today’s Halifax survey. However, the annual pace of growth was the biggest in nearly four years.

Halifax’s measure of quarterly house price growth showed a 2.1 per cent rise over December through February.

Bank of England governor Mark Carney has said the BoE is monitoring the housing market closely, and pointed to levels of activity that are still below the historic average.

Concerns about the rapid rise of the housing market prompted the Bank of England to announce in November that it would scrap the part of its Funding-for-Lending Scheme that supports mortgage lending.

But the market is still underpinned by low interest rates and the government’s Help-to-Buy mortgage guarantee programme.

The BoE is expected to leave monetary policy unchanged today after its March meeting, with interest rates still at a record low 0.5 per cent.

Mr Carney and other officials face lawmakers next Tuesday and the strength of the housing market will likely feature.

Most BoE policymakers have said the housing market is not overheating right now, although monetary policy committee member Martin Weale has said he is worried house prices are "very elevated". (Reuters)