House price growth is out of sync with mortgage rates thanks to the lag in mortgage agreements and the imminent change to stamp duty, real estate consultancy Knight Frank has commented.

Annual house price growth jumped by 0.7% in December, bringing the annual total to 4.7%, Nationwide’s House Price Index shows.

This is despite manufacturing falling at its fastest pace for 11 months in December and interest rates rising following the Autumn Budget.

A Knight Frank spokesman said: “There are two reasons why house prices are currently out of sync.

“First, a number of buyers are sitting on sub-4% mortgage offers made before the Chancellor announced her economic plans on 30 October.

“Agreements are valid for up to six months, which means some will be insulated from the increase in borrowing costs triggered by the Budget.”

He added: “The other factor supporting house prices is an imminent change to the rate of stamp duty.

“The nil rate band for stamp duty reverts to £125,000 from £250,000 in April, which means bills will rise by up to £2,500. A similar reversion means up to £6,250 in additional stamp duty for first-time buyers.”

The five-year interest rate swap – used to price fixed-rate mortgages of the same length – was 4.3% last week compared to 3.8% in early October, as the markets responded to the government planning to borrow and spend more.

In terms of predictions for the market in 2025, Knight Frank said it’s still likely to have a strong final quarter this year.

Despite worries about Labour’s move to increase employers’ National Insurance, Savvas Savouri, chief economist at QuantMetriks, reckoned action from the private sector could mitigate the impact of the Budget, by growing the self-employed sector instead.

Via @PropertyWire