House prices are set to Boom by 6.3 per cent By 2015

We can report that house prices arepredicted to boom by 6.3 per cent in 2015 as the UK economic recovery swings into action according to a new report by the influential Ernst & Young Item Club.

The optimistic outlook for the UK economy far outstrips previous estimates.

House prices are set to grow by 2.3 per cent this year, 5.3 per cent next year before hitting huge increases of 6.3 per cent in 2015.

The national increases will largely be driven by rise in London and the south east as the UK housing market varies wildly from region to region.

The EY Item Club report predicts one million housing transactions as the market really picks up pace and drives the entire economy.

The report credit Government schemes such as funding for lending, which provides banks with cheap loans to lend as mortgages, and its Help to Buy scheme.

The first part of the Help to Buy scheme is underway in the form of an equity loan helping many get on the ladder with a 5 per cnet deposit. The second part is set to launch in January and could spark a huge increase in house prices which many economists and policymakers have warned could result in a housing bubble.

GDP growth

The EY Item Club says the Uk economy will grow on the back of house price growth, more consumer spending and greater business confidence to invest.

GDP is set to grow 1.1 per cent this year, 2.2 per cent next year and 2.6 per cent in 2015 far outstripping the forecasts of the Office for Budget Responsibility.

The OBR predicts growth of 0.6 per cent this year, just 1.3 per cent next year and 2.3 per cent in 2015.

The good data could see Government forecasts for cutting the deficit cut dramatically and the publci finances greatly improved. EY predicts consumer spending will grow by 1.6 per cent this year but the percentage of salaries put into savings will drop to 5.6 per cent compared to 6.3 per cent last year.

EY Item chief economic adviser Peter Spencer says it could be a “tipping point” for the UK economy which could increase quickly and “without warning” He said: “It is looking much more positive and we are unlikely to see a repeat of 2011 when a recovery in confidence was crushed by the Euro crisis.

“Spending on the high street is holding up nicely, housing market transactions are beginning to gather pace and, perhaps most significantly, the global economy also appears to be on the mend. In fact, it is the first time in many months where we can see balanced growth in the economy.”

Slump over

The report is the latest in a line of positive economic data signalling the UK is about to end its economic malaise and return to an economy growing strongly.

The mortgage market is performing its best since the crisis with higher lending and more transaction this year as Government support kicks in.

For those looking to buy a home you should speak to a broker and find out the latest deals and whether you can join the wave of good news statistics by moving or buying your first home.