According to the Halifax, house prices rose further at the start of the year. A 1.3 percent monthly increase again easily beat the market consensus and, following an unrevised 1.1 percent advance in December, means that prices have now increased for four straight months. Annual inflation climbed from 1.8 percent to 2.5 percent, its highest mark since January 2023.

The quarterly change, the best guide to underlying developments, was a solid 2.5 percent, up from the 1.2 percent seen in the October-December period. The Halifax attributed the relative buoyancy to falling mortgage rates and what is still a tight labour market. However, it also pointed out that borrowing costs remain high compared to the recent years of historic lows and, for now, prices continue to be supported by limited supply. As a result, the lender still expects to see some modest falls during the remainder of the year.

Even so, today's report mirrors that from the Nationwide in describing a surprisingly robust housing market and this could be a key factor helping to underpin consumer spending over coming months. More generally, the January update puts the UK RPI at 4 and the RPI-P at minus 15. Overall economic activity is performing much as forecast but only due to the recent unexpected firmness of prices.

House prices are expected to rise 0.2 percent on the month after a surprisingly sharp 1.1 percent gain in December.

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.