MortgagesMay 30 2013

Housing market gains momentum: Nationwide

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ByDonia O’Loughlin

Average UK house prices are 1.1 per cent higher at £167,912 than a year ago, providing further support for the view that the housing market is gradually gaining momentum.

Nationwide’s monthly house price index revealed that the annual rate of house price growth is moving at its fastest pace since November 2011.

Robert Gardner, chief economist at Nationwide, highlighted that a number of housing market activity measures have also started to improve.

In the first four months of 2013 the number of property transactions was running at around 5 per cent above the monthly average prevailing in 2012.

The number of mortgage approvals for house purchase in the first quarter of 2013 was also around 4 per cent above last year’s monthly average.

Mr Gardner said that a number of factors are likely to be contributing to the pick up in activity including an improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures, such as the government’s Funding for Lending scheme.

Mortgage rates have fallen back towards all time lows in recent months, he said.

Mr Gardner said: “With the UK returning to growth in the first quarter of 2013, the improvement in wider economic conditions may also be playing a role in boosting sentiment.

“Widespread expectations that the economy will continue to recover gradually in the quarters ahead, that interest rates will remain low, and the ongoing impact of policy measures aimed at supporting the availability and lowering the cost of credit, all provide reasons for optimism that activity will continue to gain momentum in the quarters ahead.”

However, he warned that progress is likely to be gradual and downside risks remain. In particular, Mr Gardner warned that there has been some “softening” in the labour market, with employment growth appearing to run out of steam in the first quarter of the year.

He said: “Moreover, while inflation has fallen back in recent months, pressure on household budgets remains intense, as wage growth has also decelerated. Indeed, in real terms (i.e. after taking account of inflation) average weekly wages have been falling for some time and are now back at the level prevailing in late 2003.”