An improving economy will help boost housing market activity

Record low mortgage rates, the equity loan component of the Government’s Help to Buy scheme and a general improvement in the economic environment have helped activity in the housing market to recover. We now expect house prices to increase by 2% both this year and next. In 2015, supported by earnings growth of 3.5%, we expect house prices to appreciate by 3%. But house prices are overvalued on an historical basis, and stretched affordability means a new house price boom remains a distant prospect.