House prices are increasing at their fastest rate since early 2010, fuelled by the Government’s £80billion attempt to kick-start the economy, the Halifax said yesterday.
The Funding For Lending Scheme has been failing to get money to its key target – cash-strapped small businesses – but it is managing to cut interest rates on mortgages and make them more easily available.
For homeowners, a rise in prices is a cause for celebration, but it is another blow for first-time buyers trying to get on to the property ladder.
Between November and January, the cost of the average home jumped by 1.9 per cent, the biggest quarterly rise since the beginning of 2010.
Prices are up by 1.3 per cent on a year ago. The average home costs £162,932, which is about £2,000 more than when the Funding For Lending Scheme was introduced in August.
Another recent report, from the Land Registry, pinpointed huge regional variations in England and Wales. In London, the average home costs £371,223, a rise of 8.4 per cent on last year. In the North East, the cheapest region, it is £99,974, up only 0.3 per cent last year.
The funding scheme allows banks to borrow an unlimited amount from the Government for as little as 0.25 per cent as long as they maintain, or increase, their lending in the form of mortgages and loans to businesses.
But recent figures from the Bank of England show that lending to companies has continued to fall.
Martin Ellis, housing economist at Halifax, said: ‘The Funding For Lending Scheme has helped lenders to lower interest rates and improve availability. This is likely to have been a factor contributing to the pick-up in both home sales and prices.’
The number of homes being sold has also hit its highest level since the credit crunch struck in 2007. 932,000 homes were sold last year, the largest number since 2007 when 1.6million changed hands.
Peter Rollings, chief executive of the estate agency Marsh & Parsons, said: ‘Credit conditions look to be easing as the impact of the Funding For Lending Scheme hits home.
‘If this trend continues, we should see an increasing number of buyers able to enter the market and drive house price growth from the bottom up.’
Matthew Pointon, property economist at the consultancy Capital Economics, warned: ‘The housing market is being supported by Government interventions. But with most measures still pointing to significant house price over-valuation, they are rowing against the tide.
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