Mortgages  

House prices accelerate 6% in 12 months: Nationwide

UK house prices have risen by 5.8 per cent in the 12 months to October 2013, with the average UK property now costing £173,678, data from Nationwide’s house price index have shown.

This suggests house prices are only 7 per cent below the 2007 peak.

Robert Gardner, Nationwide’s chief economist, said: “The ability and willingness of potential buyers to transact has been steadily increasing. The ability to buy has been supported by continued gains in employment and policy measures such as the Help to Buy and Funding for Lending schemes, which have improved the availability and lowered the cost of credit. Mortgage rates are close to all time lows.

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“The willingness of potential buyers to step into the market has also been increasing. While employment has been rising steadily for some time, it is only in the last few quarters that consumer sentiment has improved markedly.

“This may in part be the result of the improved performance of the wider economy. The UK economy expanded at a healthy 0.8 per cent [quarter on quarter] pace in Q3 - the third consecutive increase and the fastest pace of growth for three years.”

There has been widespread concern over a house price bubble amid surging demand catalysed by the government’s Help to Buy mortgage loans and mortgage guarantee scheme, the latter of which will be rolled out in January.

This concern prompted intervention from the Treasury Select Committee earlier this month, which warned that the scheme appeared likely to simply “raise house prices rather than stimulate new supply” and therefore poses a serious risk to financial stability. However, recent figures from the Royal Institution of Chartered Surveyors showed an increase in housebuilding in every region of the UK for the first time in six years.

Mr Gardner added that house price growth has accelerated as buyer demand has picked up more quickly than the supply of new homes.

He said: “The risk is that if demand continues to strengthen while the supply of property remains constrained affordability could become stretched. Indeed, average wages have continued to decline in real terms even though employment growth has been fairly robust in recent years.

“Nevertheless, while house price growth has picked up, at a national level prices remain around 7 per cent below their 2007 peak. Moreover, typical mortgage servicing costs remain modest by historic standards thanks to the ultra-low level of interest rates. A typical mortgage payment for a first time buyer is currently equal to around 29 per cent of take home pay, in line with the long term average.”