Halifax bank believe the housing market is set to face ‘significant headwinds’ despite house prices increasing in June.
The bank are now part of Lloyds Banking group and are one of the biggest mortgage providers in the UK, but believe higher taxes, rising inflation and a lack of wage increases will keep house demand low for the next few years.
They believe it is just interest rates that have kept the housing market stable through this difficult economic period.
House prices for June were 1.2% higher than in May, although they were still 3.5% lower than the same period the year before.
Annual price changes are calculated slightly differently and taje the average price for the three months up to the end of June and compare them with the same three month period the year before.
House prices were down just 0.5% compared with the three months covering January to March.
Martin Ellis, Halifax’s housing economist explained, “Low interest rates, an increase in the number of people in employment and some tightening in market conditions earlier in the year are likely to have been the main factors behind the recent improvement in price trends.”
Halifax also revealed that the typical mortgage payment for a new borrower was just 28% of their disposable earnings, compared with 48% during the peak in the middle of 2007.
“A slowly improving economy and sustained low interest rates should help to support broad stability in the market over the coming months,” Mr Ellis added.
“The market is, however, likely to continue to face significant headwinds which are expected to constrain housing demand.”
Halifax added that the average home was now worth £163,049.
Prices in London are still continuing to rise quicker than the rest of the country.