House prices in the UK surged by 3.2% in September compared to the same period last year, marking the most significant rise in nearly two years, according to figures from Nationwide.
This increase, the fastest since November 2022, has been largely driven by the demand for terraced homes.
Nationwide attributed the spike to a combination of higher incomes and falling mortgage rates, which have made homes more affordable for buyers.
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This is backed by separate data from the Bank of England, which shows that mortgage approvals have reached their highest point in two years. In September, the average house price in the UK stood at £266,094.
Monthly data from Nationwide revealed a 0.7% rise in house prices between August and September, following a slight decline in August. Robert Gardner, Nationwide’s chief economist, noted that income growth has outpaced house price inflation, while borrowing costs have eased.
Gardner said, “Income growth has continued to outstrip house price growth in recent months while borrowing costs have edged lower amid expectations that the Bank of England will continue to lower interest rates in the coming quarters. These trends have helped to improve affordability for prospective buyers.”
Despite the recent pick-up in market activity, Gardner stressed that both housing transactions and prices remain subdued compared to historical norms.
Estate agents have echoed this sentiment. Amy Reynolds, head of sales at Antony Roberts, pointed out that while some sellers might be encouraged by rising prices, overpricing remains a concern. “If a property isn’t getting viewings, it’s likely down to price. The best advice we can give is to bring that price down to the market level,” she said.
The data comes amid increasing competition among lenders, with providers focusing on offering better deals to new customers purchasing homes rather than those looking to remortgage. Nationwide recently announced that new borrowers could apply for a mortgage up to six times their income with a 5% deposit, provided they opt for a fixed-rate deal of five or ten years.
Other lenders have also been reducing interest rates, though the cost of deposits and monthly repayments remains a challenge for many first-time buyers.
Although house prices have been relatively stagnant over the last year, many analysts believe that with falling interest rates on the horizon, the housing market could see a boost in demand. Evidence of this trend is seen in figures from the Bank of England, which revealed a surge in mortgage approvals.
In August, lenders approved 64,900 mortgages, up from 62,500 in July, the highest number since August 2022 and above what analysts had forecast.
Nationwide’s data highlights that terraced houses experienced the largest price increase in the past year, with values rising by 3.5%. Semi-detached homes and flats saw growth of 2.8% and 2.7%, respectively, while detached homes experienced a 1.7% increase.
During the pandemic, larger homes had seen a significant surge in value due to the “race for space” as people sought more room while working from home.
It’s worth noting that Nationwide’s figures are based solely on buyers with mortgages, excluding those who purchase with cash or through buy-to-let arrangements. Cash buyers account for about a third of all housing transactions.
Meanwhile, Halifax is set to release its own house price index for September in the coming days, offering further insight into the state of the UK housing market.
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