UK house prices increased by 1% in October and were 5.8% higher than October 2012, according to the Nationwide Building Society’s latest house price index.
The mutual said that house prices are around 7% below their 2007 peak.
The average house price is now £173,678.
Robert Gardner, Nationwide’s chief economist, said: “The UK housing market appears to be following the more resilient upward trend evident in the wider economy in recent quarters. House prices increased by 1% over the month in October, maintaining the momentum that has been building in the second half of 2013. After averaging less than 1% in the first half of the year, the annual pace of house price growth accelerated to 5.8% in October from 5% the previous month.
“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.
“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% q/q pace in Q3 – the third consecutive increase and the fastest pace of growth for three years.
“House price growth has accelerated as buyer demand has picked up more quickly than the supply of new homes. 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% 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% of take home pay, in line with the long term average.”
Nicholas Ayre, managing director of homebuying agency Home Fusion, added: “House price-growth is being driven by buyers who are feeling more positive about their lives and are willing to take a punt
“In the past they may have just sat on their hands and been reluctant to do anything, but now, with the macro view of the economy looking a lot more positive, people are wanting to get that property they have been waiting for and not get lost in the action.
“The Nationwide figures show us that headline house prices are tracking the economy in its recovery and upward trend, annual growth at 5.8%, is just keeping ahead of inflation, which is a healthy line of growth and where we should expect it to be.
“Although wages have continued to decline in real terms, we are seeing a steady spread of loan-to-value mortgages, so buyers do not seem to be maxing out on finance and are keeping within affordability boundaries.”
