UK house prices rising 6% a year, says Nationwide

Sat 30 Nov 2013

UK house prices are rising by more than 6% a year, taking the annual rate of price growth to its highest level in more than three years, according to figures from the UK's largest building society.

The news comes after the Bank of England moved to head off the threat of a housing bubble by closing its Funding for Lending scheme to mortgages from January.

Nationwide's latest snapshot of the housing market, based on mortgages it has approved in November, showed the average house price is 6.5% higher than 12 months ago, at £174,566.

The lender said this was the highest annual rise since July 2010, although prices were still about 6% below the peak they reached in late 2007. On a month-on-month basis, prices increased by 0.6%, slower than in October, when prices rose by 1%.

Nationwide's chief economist, Robert Gardner, said activity in the housing market had been buoyed by improved confidence in the economy and government schemes to improve the availability of loans and keep costs low.

"Activity in the housing market has picked up strongly in recent months," said Gardner.

"A large part of the improvement can be attributed to further improvements in the labour market and the brighter economic outlook, which has helped to bolster sentiment amongst potential buyers.

"Policy measures aimed at keeping down the cost and improving the availability of credit are also playing an important role."

Funding for Lending has led to a price war on mortgage rates, and Gardner said for a buyer purchasing the typical UK home with a 10% mortgage it had led to a reduction in mortgage repayments of around £110 a month.

Although brokers warned of the potential for rising costs following the withdrawal of Funding for Lending, economists said they did not expect it to lead to a marked slowdown in house prices.

"With the Help to Buy mortgage guarantee scheme only just starting to kick in and interest rates likely to stay extremely low for some time to come, there is still substantial support to the housing market even in the absence of any further support from the FLS [Funding for Lending scheme]," said Howard Archer, chief UK economist at IHS Global Insight.

"Furthermore, overall markedly improved consumer confidence and rising employment is likely to continue to support housing market activity."

Nationwide's figures cover the first full month of the government's Help to Buy mortgage guarantee scheme. The lender is not offering Help to Buy mortgages, but prices paid by buyers may have been pushed up by extra competition from buyers who were.

Land Registry figures for October, released on Thursday, showed a surprise fall in prices. It also revised down its growth figures for September.

Source; The Guardian

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