House prices increased by 1.3 per cent during September, bringing the annual rate up to 8.2 per cent – its fastest annual rate of growth since February 2005. A weak patch this time last year, when prices fell by 0.2%, exaggerates the annual increase, but the more recent three-month-on-three-month series still shows a clear pick up in price growth since July.
The price of a typical house is now £169,413, almost £13,000 more than at this time last year and the equivalent of a rise of more than £35 per day over the last 12 months.
Demand in the housing market seems firm
Buy-to-let landlord demand looks to remain strong for some time to come. Around two thirds of existing landlords have plans to extend their portfolios and many have access to finance from gearing their existing portfolios.
Owner-occupier borrowers are also managing to overcome the financing hurdle. Many reports suggest that parents and family are increasingly funding deposits for their children.
Fionnuala Earley, Nationwide’s Group Economist, said: Nationwide analysis of mortgage lending data suggests that borrowers increase their borrowing by around 10 per cent when remortgaging.
Based on a typical house purchase two years ago remortgaging now would release around £11,500 which, if used to help an average first-time buyer onto the housing ladder, would leave them only having to find a further £2,300 to fund a 10 per cent deposit. As raising the deposit, rather than meeting the mortgage payment, is the biggest hurdle to first-time buyers, such a helping hand goes a long way.
Over a longer time horizon, around 75 per cent of younger people still want to be homeowners, even among the youngest group. So, as long as interest rates mean that debt servicing costs are relatively low, those who can raise a deposit will still want to buy, especially if they expect house prices to continue to increase.
Milan Khatri, Royal Institution of Chartered Surveyors (RICS) chief economist said: “House price figures confirm that the market is beginning to boom with inflation for the quarter to September running at the highest rate in over two years.
House prices are also rising at around twice the pace of wages in the past year, increasing financial pressure on would-be buyers, though overall household confidence and spending on the high street may benefit.”
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