House prices in the UK are likely to remain more or less unchanged in 2006. According to Halifax, a mortgage lender in the UK, house prices will rise by 3% in the following year. However, Capital Economics believes that house prices will fall in 2006 since the housing market is overvalued.

This stagnation of the house price inflation is a result of the steep increase in house prices in the last few years. Because of the unprecedented increase in house prices in the UK, the first time buyers cannot afford to buy new houses. Buying a house might become affordable next year with interest rate cuts and increase in wages.

The ratio of house prices to income has reached a new high. At the same time, the Bank of England has decided that there will be no interest rate cuts for the time being. This has made it very difficult for the first time buyers to buy new houses.

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