UK house price growth accelerated in October to reach a record high of £196,807, new figures show. According to the monthly Nationwide House Price Index, UK house prices were up 3.9% from a year ago, compared to 3.8% for September. Month-on-month they rose 0.6%. Nationwide’s chief economist Robert Gardner said growth over the past five […]
UK house price growth accelerated in October to reach a record high of £196,807, new figures show.
According to the monthly Nationwide House Price Index, UK house prices were up 3.9% from a year ago, compared to 3.8% for September. Month-on-month they rose 0.6%.
Nationwide’s chief economist Robert Gardner said growth over the past five month was broadly consistent with earnings growth over the longer term.
Gardener said: “While this bodes well for a sustainable increase in housing market activity, much will depend on whether building activity can keep pace with increasing demand.
One of the main reasons cited for increasing house prices has been the failure to build enough homes to keep pace with demand.
Gardener said that low interest rates were helping to offset the negative impact of rising house prices on affordability, despite being at an all-time high.
He said data from the Council of Mortgage Lenders suggests that almost 90% of new mortgages were taken out on fixed rates over the past twelve months, reflecting the ongoing uncertainty about the timing of UK interest rate increases and a desire to lock in low interest rates.
Gardener said: “Fixed rate deals are most popular amongst first time buyers for whom certainty over monthly payments is likely to be particularly important. Indeed, over the past twelve months 95% of new mortgage lending to first time buyers was on fixed rates.
“As a result of the popularity of fixed rate mortgages in recent years the proportion of outstanding mortgages on variable interest rates has declined steadily, from almost 70% in mid-2012 to almost half in mid-2015. This should help to insulate many households from the impact of higher interest rates, though the proportion on variable rates is still higher than the 38% prevailing in 2007.”
Dr Howard Archer, chief economist at IHS Economics, said housing market activity was supported by stronger earnings growth, high employment, elevated consumer confidence and low mortgage interest rates. A robust buy-to-let sector is also helping to lift activity.
“We expect house prices to see solid increases over the coming months amid firm activity. Given that house prices were soft in the latter months of 2014, this is likely to see annual house price inflation on the Nationwide’s measure move higher over the coming months.”
