House price optimism rebounds as inflation collapses to record low

25th March 2015

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As the amount of mortgages granted to homebuyers rises to a five month high, it appears optimism in regards to house prices has also rebounded among Britons.

While the amount of mortgages taken out rose for the second consecutive month during February according to the British Bankers Association (BBA), the Halifax has reported that house price optimism also bounced back during the month, as inflation continued to fall and the expectation of an interest rate rise receded further.

During February, the lender’s Housing Market Confidence Tracker, saw a rallying of house price optimism among consumers, from an 18-month low of +52 at the start of the year to +60.

This optimism is reflected in the outlook for both buyers and sellers, with buying sentiment up to its highest level since the Confidence Tracker launched in 2011 at net +35. At the same time selling sentiment has reached an all-time high and now stands at +27.

However, this still this doesn’t tell the whole story, as the underlying picture is a cautious one, with 57% predicting flat or modest house price increases of less than 5% at best over the next 12 months. And despite inflation falling to 0% in February and various Monetary Policy Committee members asserting the next interest rate move is as likely to be down as it is up, 43% of consumers believe mortgage interest rates will be higher than they are now in a year’s time.

Craig McKinlay, mortgages director at Halifax said: “With inflation now at its lowest level since records began and the chances of the next interest rates change reportedly just as likely to be down as up, consumers are feeling more optimistic about the housing market again.

“The traditional slow start to the year for the housing market has already begun to give way to increased activity, but consumers remain relatively cautious. For sustainable long-term growth we need a period of stable growth and a more comprehensive house-building programme.”

House Price Optimism mirrors Economic Optimism Index (click to enlarge)

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