PUBLISHED BY THE GAURDIAN ON LINE 17TH DECEMBER 2021

The mortgage lender said it expected the red-hot increases in average house prices over the last two years – 8% so far this year and 6% in 2020 – to end, with growth forecast to be “broadly flat” in 2022.

The Bank of England raised interest rates on Thursday for the first time since the start of the coronavirus pandemic, from 0.1% to 0.25%, and signalled further increases in the months ahead, potentially dampening appetite for spending as budgets come under strain.

The Bank made its move after the Office for National Statistics said that UK inflation jumped to a 10-year high of 5.1% in November, as the price of petrol reached a record high and the global chip shortage pushed up car prices.

“With the prospect that interest rates may rise further in 2022 to subdue rising inflation, and with government support measures phasing out, greater pressure on household budgets suggests house price growth will slow considerably,” said Russell Galley, the managing director of Halifax.

Halifax expects strong housing price levels to be maintained – the average UK house price is £272,992, almost £34,000 higher than at the start of the pandemic – but that growth in 2022 would be between flat and 2%.

“There is still a large degree of uncertainty around this forecast,” Galley said. “Particularly around the extent to which savings accrued during the pandemic continue to boost housing transactions and prices, and how lasting the recent shifts in housing preferences prove to be.”

With the pandemic-fuelled shift to flexible, remote and home working, homebuyers have rushed to buy larger properties in picturesque and rural locations outside urban centres.

Other factors increasing homebuying were the government’s stamp duty holiday, which came to an end in England and Northern Ireland in September after finishing earlier in Scotland and Wales, and historically low interest rates.

“We normally see a seasonal market slowdown towards the end of the year, but we are witnessing a comparably active market instead,” said Guy Gittins, the chief executive at the real estate agent chain Chestertons. “As a result of demand outstripping supply, the market has seen a 30% drop in sellers willing to lower their asking price. Looking ahead, we are still seeing plenty of unsatisfied buyer demand.”