No let up in spiralling house prices
03 March 2004
House prices have continued to rise despite continued attempts to control them by increasing interest rates, new research has revealed.
Figures from the Halifax show that year-on-year rise in house prices stood at 17.8 per cent in February, up from 16 per cent in January and 15.4 per cent in December. The average price of a home rose 1.6 per cent during February to £148,089, though this was down on January's sharp 2.3 per cent increase.
Britain's biggest mortgage lender said that the UK housing market shows no signs of slowing down and claims the housing market is being propped up by a strong labour market, low interest rates and a shortage of new homes.
The percentage of earnings spent on mortgage repayments rose from 13.9 per cent to 15.5 per cent in February, but compared with the long-term average of 21 per cent, mortgage repayments remain relatively affordable.
The rapid growth in home prices has also led to a significant increase in properties which may be subject to inheritance tax, Halifax points out. The number of homes valued at more than the current threshold of £255,000 is thought to have risen by 390,000 to 1.94 million.
Meanwhile, the average first-time buyer now pays more than £1,000 in stamp duty, equal to around six per cent of their deposit or two weeks' salary.
Shane O'Riordain, group economist for Halifax, said: "We believe the chancellor should index link both the stamp duty and inheritance tax thresholds to house price growth, to prevent increasing numbers of homeowners facing higher tax liabilities."