House prices increase continues

House prices posted their biggest year-on-year growth in more than two years in February as the market continued to improve, Halifax has reported.

At £163,600 on average, prices were 1.9% higher than a year earlier and the lender said it expects to see a national increase in house prices over the course of 2013.

The annual increase was the highest recorded since September 2010, and prices were also up by 0.5% on a month-on-month basis.

Various studies have reported improvements to the housing market since the Government started a scheme last August to boost lending.

The number of mortgages on the market has increased by around one third since the Funding for Lending Scheme, which helps borrowers by giving lenders access to cheap finance, was launched. Lenders are also offering some of their cheapest ever mortgage rates.

Halifax said that prices in the three months to February were also 1.9% higher than in the previous quarter. This is the third time in a row that prices have risen on this measure of the underlying trend. The study said that the quarterly figures give the clearest indication of what is happening in the market as they smooth out monthly volatility.

Halifax also pointed to HM Revenue and Customs figures which show that house sales have been steadily lifting in recent months. There were 82,320 sales in January this year, marking the seventh monthly increase in sales.

Martin Ellis, housing economist at Halifax, said: "The more than half a million increase in the number of people in employment over the past year is likely to have been a factor supporting housing demand. We expect to see a national increase in house prices over the course of 2013. Weak income growth and continuing below-trend economic growth, however, are likely to remain significant constraints on housing demand."

Mark Harris, chief executive of mortgage broker SPF Private Clients, pointed out that the national house price averages mask strong market variations across the country.

Property analyst Hometrack recently found that three-quarters of the increases in house prices it recorded in February across England and Wales were due to rises in London and the South East. Hometrack found that while prices increased in London by 0.3% on a monthly basis in February, they dropped by 0.2% in the North East.