House prices fell by 1.3% in December, bringing the overall change for 2010 to -1.6%, with the average house price now standing at £162,435. However, the quarterly figure shows that the fall in prices is decreasing – the price change between October and December was just 0.9% according to the latest Halifax house price report.
Martin Ellis, housing economist at Halifax, said: ‘Interest rates are likely to remain low for some time. This will continue to support a favourable affordability position for those entering the market and limit financial pressure on existing homeowners to sell.
‘Current signs that homeowners are becoming more reluctant to sell would, in continued, help reverse the imbalance between buyers and sellers. Nonetheless uncertainty about the economy, weak earnings growth and higher taxes could put some downward pressure on demand.’
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Howard Archer, an economist at Global Insight, said: ‘Any early interest rate hike in 2011 would be bad news for the housing market and likely to weigh down on prices – not just the rate rise itself but the impact on potential house buyers’ psychology resulting from the fact that they would be facing rising interest rates.
‘Critical to the development of house prices over the coming months will be the amount of houses coming on to the market, mortgage availability, how well the economy and jobs hold up as the fiscal squeeze increasingly kicks in, and what happens with interest rates.’
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