According to the Halifax, house prices continued to gain ground at year-end. A 1.1 percent monthly increase again easily beat the market consensus and followed a slightly larger revised 0.6 percent advance in November. Prices have risen for the last three months and the annual inflation rate now stands at 1.7 percent, its highest mark since last February.

The quarterly change, the best guide to underlying developments, climbed to 1.2 percent, up from minus 0.6 percent in the three months to November and its first positive print since the three months ending last April. However, the Halifax pointed out that the recovery was more due to a lack of supply rather than a significant increase in demand, although the latter has strengthened slightly in recent months. Falling mortgage rates have probably provided a modest boost but the lender still expects prices to drop between 2 percent and 4 percent in 2024.

More generally, the December update boosts the UK RPI to 8 and the RPI-P to 4. Both measures show overall economic activity running just marginally ahead of market expectations.

Prices are seen building on November's 0.5 percent monthly gain with a 0.1 percent increase.

The Halifax House Price Index (HPI) is the UK's longest running monthly house price measure with data covering the whole country going back to January 1983. The index is based on the largest monthly sample of mortgage data, typically covering around 15,000 house purchases per month, and covers the whole calendar month. In March 2016 Markit announced that it would be acquiring the Halifax HPI from Lloyds Banking Group. Halifax continues to publish the index on behalf of Markit and both the name and the basic methodology remain unchanged. However, in May 2020, the annual growth measure was changed from the average of the last three months to just the latest month.

Home values affect much in the economy - especially the housing and consumer sectors. Periods of rising home values encourage new construction while periods of soft home prices can damp housing starts. Changes in home values play key roles in consumer spending and in consumer financial health. During the first half of this decade sharply rising home prices boosted how much home equity households held. In turn, this increased consumers' ability to spend, based on wealth effects and from being able to draw upon expanding home equity lines of credit.