'Surprise' surge in March pushes average house price to new high

House prices recorded a "surprise" 1.5% jump in March to reach a new high of £227,871 on average.

The 1.5% increase was the biggest month-on-month upswing seen since August 2017 and follows a 0.5% increase in February, figures from Halifax show.

Across the UK, property values were 2.7% higher than a year earlier, accelerating from an annual increase of 1.8% seen in February.

Despite average house prices reaching a new high, Halifax said typical mortgage payments accounted for less than a third (29%) of home owners' disposable income in the fourth quarter of 2017, compared with nearly half (48%) in 2007.

The fall has been driven mainly by low mortgage rates, despite the first base rate rise in a decade in November 2017, Halifax said.

Commenting on the report, Howard Archer, chief economic adviser at EY Item Club, said house prices had "surprisingly spiked" in March.

He said: "The Halifax surprisingly reported house prices spiked 1.5% month on month in March...

"The March spike in house prices reported by the Halifax does not change our view that 2018 will be a difficult year for the housing market. We still expect price gains over the year will be limited to a modest 2%."

Russell Galley, managing director of Halifax, said the annual rate of house price growth "continues to be in a narrow range of under 3%; though the average price of £227,871 is a new high.

"Activity levels, like house price growth, have softened compared with a year ago.

"Mortgage approvals are down compared to 12 months ago, whilst home sales have remained flat in the early months of the year.

"This lack of direction in the housing market is in stark contrast to the continuing strength of the UK jobs market."

Mr Galley said that in the coming months, continued low mortgage rates by longer-term standards, a "robust" labour market and a continuing shortage of properties for sale should support house price growth.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The jump in Halifax's measure of house prices in March just looks like volatility, rather than the start of a strong upward trend."

He continued: "With mortgage rates now on a rising path, given that wholesale funding costs have increased since the start of the year and the Term Funding Scheme no longer is subsidising new lending, house prices will struggle to increase over the coming months."

Russell Quirk, founder and chief executive of Emoov.co.uk, said: "While we have seen a tentative start to the year, it would seem that the spring is starting to return to the step of the UK market where price growth is concerned."