Property boom continues as house prices jump 8.8% year-on-year
01-30-2014
Picking up: there have been 12,875 sales of newly built properties through the Help to Buy scheme since its launch nine months ago
Staff/Agencies
The UK's housing boom has continued into the New Year with Nationwide reporting today that prices surged 8.8% year-on-year in January.
Prices lifted by 0.7% month-on-month to reach £176,491 on average in the UK, marking the 13th monthly rise in a row as consumer confidence grows, the building society said.
The 8.8% annual increase is the biggest jump since May 2010 and follows an 8.4% year-on-year uplift in December, although Nationwide said prices are still about 4% below their 2007 peak.
Robert Gardner, Nationwide's chief economist, said: "The housing market is continuing to gather momentum on the back of further solid gains in employment, record low mortgage rates and rising confidence."
He said there have been "encouraging signs" that housing market activity is returning towards "more normal levels", with recent HM Revenue and Customs figures showing that the number of house sales in December increased to 103,000, which is up by almost a third (30%) on the same month in 2012.
Mr Gardner continued: "The pick-up in activity appears to be fairly broad-based, and it is encouraging that first-time buyers are a key driving factor behind the upturn."
Last week, the British Bankers' Association (BBA) reported that the number of mortgage approvals granted to home buyers lifted to a six-year high of 46,521 in December.
The BBA said the rising figures are further evidence of blossoming consumer confidence and the impact of Government support schemes such as Help to Buy.
Figures released yesterday by the Department for Communities and Local Government showed there have been 12,875 sales of newly built properties through the Help to Buy equity loan scheme since its launch nine months ago.
A second phase of Help to Buy, which offers state-backed mortgages to people wanting to buy a new-build or an existing property, was launched in October and since then the number of mortgages on the market for people with just a 5% deposit has tripled.
Mr Gardner described first-time buyers as "the lifeblood of the housing market". He said that at present, the typical first-time buyer home costs 4.6 times average earnings, which is well above the 20-year average of 3.6 times earnings but less than the 5.4 recorded at the top of the market in 2007.
Mr Gardner said more than a million first-time buyers have entered the market since the Bank of England base rate was cut to its historic 0.5% low in 2009.
He cautioned: "While we do not expect interest rates to rise until mid-2015, borrowers should be prepared for the prospect of interest rates increasing back towards more normal levels."
Toughened mortgage rules are due to be introduced in April, which experts have said are likely to keep a lid on lending. The new rules aim to prevent any return to irresponsible lending and mean that lenders will have to consider not only whether someone can afford their mortgage repayments now but also when interest rates eventually start to rise.