Average house prices in the UK increased by 1.1% month-on-month in December, the third consecutive month to record house price rises, Halifax has found.

The lender’s house price index (HPI) revealed that overall, average house prices in the UK increased by 1.7% in the 12 months to December.

The average house price in the UK stood at £287,105 in December, which Halifax said is a £3,000 increase compared to November.

Personal finance analyst at Bestinvest, Alice Haine, said: "House prices rose 1.7% over the course of 2023, defying expectations of a decline as high inflation and soaring borrowing costs dented affordability levels for first-time buyers and homeowners looking to refinance. While interest rates have been on pause at a 15-year high of 5.25% since August 2023, the drag effect of the Bank of England’s 14 interest rate rises did not hit the monthly data either with prices increasing 1.1% in December - a faster pace of growth compared to November’s 0.5% uplift.

"The surprise annual rise in prices masks six consecutive months of property price falls between April and September, making it appear the downturn expected for 2023 was more of a hiccup. However, the uplift towards the end of the year was largely driven by a shortage of stock to choose from rather than a rush of demand."

The HPI revealed that Northern Ireland continued to be the strongest performing nation and region I the UK, with house prices increasing by 4.1% on an annual basis. The average price for a property in the country currently costs £192,153, a year-on-year rise of £7,595.

The South East of England was the worst performing region in the UK throughout 2023, with prices dropping by -4.5% over the course of the year, currently sitting at £76,804.

Despite the increases in house prices in the UK throughout 2023, Halifax has predicted that house prices will drop between -2-4% in 2024 as a result of financial and political situations.

Director at Halifax Mortgages, Kim Kinnaird, added: "As we move through 2024, the UK property market will continue to reflect the wider economic uncertainty and buyers and sellers are likely to be naturally cautious when considering making a move.

"While wage growth is now above inflation, helping to ease cost of living pressures for some and improving housing affordability, interest rates are likely to remain elevated for as long as inflation remains markedly above the Bank of England’s target. Our latest forecast suggests house prices could fall between -2% and -4% during the coming year, although, as with recent years, forecast uncertainty remains high given the current economic climate."

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