New figures from the Halifax show further drops in UK house prices at the end of last year, while
predicting “limited movement” in 2011.

The lender’s latest House Price Index reports that December 2010 saw a 1.3% monthly drop, to an
average house price of £162,435. This compares with an average of £168,176 at the end of 2009.

Halifax housing economist Martin Ellis expects market conditions to restore the balance between
buyers and those looking to sell their homes. “Interest rates are likely to remain very low for some
time,” he said. “This will continue to support a favourable affordability position for those entering
the market and limit financial pressure on existing homeowners to sell.”

However, the Halifax feels that larger economic issues could still exert a downward pressure
on mortgage demand, with Ellis specifically highlighting “uncertainty about the economy, weak
earnings growth and higher taxes”.

While falling house prices rarely signal good news for homeowners, the report puts the figures
into clear context, comparing the 0.9% quarterly change in the last three months of 2010 with the
quarterly falls of 5-6% that were seen in the second half of 2008.

The report also points out how the current low interest rate environment has reduced the relative
burden of mortgage debt. Typical mortgage payments for a new borrower equated to around 29%
of average disposable earnings in the last quarter of 2010, compared with a figure of 48% from mid-

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