The price of a typical UK home has surpassed £250,000 for the first time, according to one of the industry’s most closely watched house price trackers.
In its latest house price index, Nationwide estimated that prices had risen by 0.7 per cent in October compared with the previous month. It means that the value of the average house in Britain now stands at £250,311. Over the past 12 months, prices were up by 9.9 per cent, slightly below the 10 per cent year-on-year growth recorded in September but ahead of economists’ predictions.
The figures will allay worries that the market would slow significantly after the end of the stamp duty holiday on September 30. The tax break, which at its peak saved buyers as much as £15,000, along with a post-pandemic desire for more space and bigger gardens has added fuel to the property market. Since March last year, at the start of the pandemic, the average house price has risen by nearly £31,000.
Robert Gardner, chief economist at Nationwide, said: “Demand for homes has remained strong, despite the expiry of the stamp duty holiday at the end of September. Indeed, mortgage applications remained robust at 72,645 in September, more than 10 per cent above the monthly average recorded in 2019.
“Combined with a lack of homes on the market, this helps to explain why price growth has remained robust.”
Jason Tebb, chief executive of OnTheMarket, an online property portal, said that “this is perhaps the best sellers’ market we’ve seen in decades”, given the continuing imbalance between supply and demand. “Buyers are still having to compete for the better properties, which in many cases is leading to sealed bids and now, in some instances, gazumping, too,” he said.
Gardner acknowledged that the outlook was “extremely uncertain” and that the pace of activity may slow over the months to come. He said that it was still unclear how the economy would respond to the withdrawal of some of the government support measures brought in last year, while the rising cost of living has served to weaken consumer confidence.
House prices have been supported by record low interest rates in recent years, which have allowed buyers to take out bigger mortgages. However, the expectation in the City is that the Bank of England, in an attempt to tackle rising inflation, will increase interest rates from the present 0.1 per cent before the end of the year and possibly as early as today, when the Bank’s monetary policy committee convenes for a vote.
Gardner believes that a rate rise would likely have a “cooling influence” on the property market, but he dismissed any worries that it would make many people’s monthly mortgage repayments unaffordable. “Providing the economy does not weaken significantly, the impact of a limited rise in interest rates on households is likely to be modest,” he said.
Most borrowers are on fixed-rate mortgages, meaning that their monthly payments are unaffected by changes in interest rates. Only about 20 per cent of households — the lowest percentage on record — have a variable-rate mortgage directly affected by changes to interest rates.
Should the Bank of England raise rates to 0.5 per cent, Nationwide estimates that the average borrower on a variable-rate mortgage will see their monthly repayments rise by £28, or an extra £336 a year. If rates were lifted to 1 per cent, that would mean an extra £64 each month, or £768 a year.