The quarterly increase was 2.8% in October, slightly higher than the 2.5% average for the first nine months of this year. The annual rate stood at 9.7% – the highest since August 2014.
Increased difficulty in getting on the property ladder, and the prospect of a rate rise, is expected to put the brakes on house price growth.
Halifax estimates growth in London will slow more sharply than in other regions. Despite leading house price growth since 2013, the capital saw an easing in house price growth from 21% in Q3 2014 to 13% for the same time this year.
Martin Ellis, housing economist for Halifax, said: “A continuing shortage of supply is likely to continue as a significant constraint on activity over the coming year. Sales in 2016 are expected to be modestly higher than this year, but to remain well below the peak of 1.6 million in 2016.”
UK home sales and the volume of mortgage approvals for house purchases in Q3 2015 both saw a 4% quarter-on-quarter increase. Halifax predicts national sales are likely to be very similar to 2014’s 1.22 million.
Ellis said house price growth has been stronger than expected this year due to the decreasing risk of an imminent rate rise, further falls in mortgage rates during the year and weaker housing supply than expected.
Halifax estimates that interest rates movements are likely to have a significant bearing on house price developments in 2016 and beyond.
“When the time finally comes for the first rise in official interest rates, the Bank of England is likely to adopt a cautious approach to raising rates due to concerns about households’ ability to make higher repayments on their debts. Interest rates are, therefore, likely to rise at a gradual pace.”
Ellis said that rises in the base rate will contribute to slow down house price growth. He said gradual rate rises and increasing incomes should keep mortgage payment affordability manageable for the overwhelming majority.
He added that an upward trend in housebuilding is needed to bring demand and supply into better balance, helping to constrain upward pressure on house prices.