PROPERTY prices edged closer to the £200,000 mark as values hit another new record in October, according to Britain’s biggest building society.
The cost of a typical three bedroom semi is now £196,807 after a month-on-month rise of 0.6 per cent and an annual jump of 3.9 per cent.
House price growth is now at a six-month high on the back of rock bottom mortgage rates and rising wages, said the Nationwide.
Other figures from the Bank of England also showed a buoyant property market with mortgage lending up by £3.6bn in September – the biggest net increase since April 2008.
This beats August’s £3.4bn and the average monthly increase of £2.6bn over the previous six months, found the Bank’s latest Money and Credit report.
Robert Gardner, Nationwide’s chief economist, said low mortgage interest rates are helping to keep owner’s home loan repayments affordable and close to the long-term average as a share of take-home pay, despite the upward march in house prices.
Buyers and re-mortgagers are also protecting themselves from a future leap in the base rate – currently at 0.5 per cent – with nearly 90 per cent of new mortgages taken out over the past 12 months being fixed rate products.
Mr Gardner said: “This is probably a reflection of ongoing uncertainty about the precise timing of UK interest rate increases as well as a desire to lock in low interest rates.
“Fixed rate deals are most popular amongst first time buyers for whom certainty over monthly payments is likely to be particularly important. Over the past 12 months 95 per cent of new mortgage lending to first time buyers was on fixed rates.”
The popularity of the deals should help to insulate many households from the immediate impact of a rise in interest rates.
Mark Dyason, director, at independent mortgage broker Edinburgh Mortgage Advice, said: “Fixed rates mortgages, especially five-year fixes, are by a distance the most popular with borrowers right now.
This is probably a reflection of ongoing uncertainty about the precise timing of UK interest rate increases as well as a desire to lock in low interest rates
“Any rate rise talk from the Bank of England travels like wildfire through the ranks of homeowners and prospective homeowners.
“Borrowers know higher rates are coming sooner or later and they are battening down the hatches in advance.
“First time buyers and people with smaller deposits are especially likely to select a fixed rate because that’s what most lenders are offering at high loan to values.
“With the interest rate upcycle surely getting closer, more borrowers on fixed rates cannot be a bad thing.”
A separate report from the National House Building Council, a warranty and insurance provider, found that the number of new homes being registered with it so far this year is nine per cent up on a year ago with activity on track to grow at its fastest rate 2007.
However Mr Gardner cautioned: “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.”
Housing Minister Brandon Lewis said: “We want to ensure that anyone who works hard and aspires to become a home owner has the opportunity to do so.
“Government initiatives have already helped more than 230,000 people to buy since 2010 and we are going even further to deliver 200,000 new starter homes, which will be available at a 20 per cent discount to first-time buyers.”
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