The average UK house now costs £162,764, according to figures from Nationwide.

The building society's house price index showed a 0.5% rise in November, the seventh consecutive rise in as many months. The index is now just 12.5% short of its peak in October 2007.

Meanwhile year-on-year house price inflation increased from 2.0% to 2.7% as the latest statistics from the Bank of England showed total net lending to individuals rose by £0.3 billion in October.

These two sets of figures are rather encouraging when it comes to looking at what's happening in the mortgage market.

At £162,764, the average house price is at a similar level to where it was in early 2006 and the slower rate of change suggests that house prices are now rising at a more moderate pace than they have been doing for some time.

Lending again

Meanwhile the latest data from the Bank of England confirms that the volume of mortgage approvals edged up a little further in October.

Lenders are starting to lend again - albeit in a somewhat moderate fashion but at least they are starting to add a little give to the system. Slowly but surely we are starting to see more competitive deals come on to the market although the better priced products still require at least a 15% deposit (85% LTV).

One of the key drivers for rising property prices has been the lack of new instructions on estate agents books and there is little sign of this changing, if anything it will get worse. More of that later.

Unemployment has also had a major impact on the housing market. While we are in the deepest recession since records began employers are taking a more flexible attitude to working practices, reducing the number of hours that employees work rather than opting for the more devastating slash and burn which leaves many floundering.

Brokers up and down the country are reporting a glimmer of light at the end of what has been one of the longest tunnels of gloom in our lifetime. Indeed, for many it has been the biggest period of wealth destruction this country has ever known.

However, just as the wheels of the property market start to gather some momentum there is a great big stop sign approaching. Christmas will put the brakes on the market. There are also some significant stumbling blocks as we head into 2010.

Stamp Duty

First off there is the removal of the extended zero rate band of Stamp Duty.

The starting threshold now stands at £175,000 – still above the UK average house price of £162,764 – but when it drops back down to £125,000 the impact on buyers will be felt hard and is likely to distort the market further.

This is going to be a blow for homebuyers but will also be a big deterrent to first time buyers entering the market, which in turn will hit first time sellers, second time buyers, second time sellers and third time buyers and so forth.

Then there is the General Election. With the Conservatives having pledged to scrap Home Information Packs as the election draws closer there will be even less incentive to put your home on the market. Why pay for something when a potential next government says that you won’t have to? Until this issue is resolved fewer properties will come onto the market which in turn will continue to push up prices.

Underlying credit issues are also a factor as we head into 2010. At some point in the New Year I would expect to see a couple of new mortgage lenders enter the market but neither will have the clout to get the market out of its current rut.

And while we should expect a small, modest but healthy rise in lending in the New Year there is also the issue of inflation to contend with.

This figure is rising rather rapidly at the moment and should interest rates rise dramatically to counter inflationary pressure we could see the entire new house of cards that we have built come crashing down around our ears.

Overall, my prediction for 2010 really has to be similar to what we have seen throughout 2009...

Expect more of the same as we bubble along the road to recovery, but also expect the unexpected and be prepared for the worse.

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