British house prices rose a seasonally adjusted 2.2 per cent in January from the previous month, according to the latest monthly survey by the Halifax building society.
Annual house price inflation stands at 16 per cent.
Halifax said the average price paid by a first-time buyer breached the £100,000 sterling barrier for the first time in January following a 22.6 per cent rise in the price paid by first-time buyers over the past year. A year ago, the average price for a first-time buyer was £82,968.
The economy is expected to grow more rapidly in 2004 than during the past three years, which should stimulate further increases in employment, therefore further underpinning the most fundamental pillar supporting the housing market, Halifax added.
It said that whilst increasing interest rates will have an adverse effect on housing affordability, the likely scale of the rise in rates will mean that mortgage payments will remain low as a percentage of earnings.
Mortgage payments currently account for 13 per cent of gross earnings. Should base rates rise to the City consensus figure of 4.5 per cent, this would rise to around 15 pct, below the long-run average of 21 per cent, Halifax said.
Halifax noted that the 16 per cent number is the quarterly year-on-year figure. This figure provides a much better picture of underlying trends compared to a monthly year-on-year number as it smoothes out any short-term fluctuations.
The Standardised Average Price (seasonally adjusted) rose to £145,610 in January from £142,033 in December.