‘Surprising’ increase of 1.3% is biggest monthly rise for more than two years, but building society’s figures still show longer-term decline
The average price of a UK home leapt by 1.3% in August, the biggest monthly increase in two-and-a-half years, according to the latest figures from Nationwide building society.
The sharp increase reversed the falls of the previous two months and was markedly higher than any other monthly rise since January 2010. The lender described the increase as “a little surprising”, but said it would be wrong to read too much into one month’s data.
The three-month figure shows a 0.5% drop in prices, while the annual figures showed a drop of 0.7%. These compare with June’s figures of a 0.8% decrease over three months and an annual fall of 2.3%.
The society’s chief economist, Robert Gardner, said the slowdown in year-on-year falls was “provides evidence that conditions remain fairly stable”.
He added: “This may be explained by the surprising resilience evident in the UK labour market, with further increases in employment in recent months, even though the UK economy has remained in recession.”
Nationwide’s index is based on values when a mortgage is approved by the lender, which are then weighted to produce the price of a “typical house”. This is in contrast to Land Registry figures which are based on sale prices and have recently highlighted a big difference between prices in London and beyond.
Gardner said monthly price changes had been influenced by a number of one-off factors in 2012, such as the end of the stamp duty holiday for first-time buyers: “These are factors that cannot be controlled by the usual process of seasonal adjustment.”
While prices have been up and down throughout the year, they remain well below the level they reached when the property market was thriving. According to Nationwide’s latest monthly snapshot of the market, the average price of a UK home stands at £164,729, still 11% down on the peak price of £186,044 recorded in October 2007.
Activity also remains much lower, with the average number of mortgages approved each month running at below 50,000, around half of the level seen between 2005 and 2007.
Nationwide says that first-time buyers who are still entering the market are putting an average of 29% of their take-home pay towards mortgage repayments, compared with 40% before the financial crisis. However, while some of this fall has been driven by lower interest rates and house prices, Gardner said first-timers were also increasing their mortgage terms, with the average up from 25 years to 28.
Rival lender Halifax has just cut its rates for first-time buyers, although the best deals are still only available to those who can raise a sizeable deposit. The rate on the bank’s two-year fixed-rate deal is 3.94% between 75% and 80% loan to value, while at 80% to 85% LTV it is 4.44% and at 85% to 90% LTV it is 6.09%. All of the deals are fee-free.