Average UK house prices climb to all time high but growth rate eases significantly

30th October 2014

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The typical cost of a UK home has climbed to an all-time high despite an easing in overall price growth across the market.

According to non-seasonally adjusted data from Nationwide, the average house price rose to £189,333 in October, 1.8% higher than the October 2007 peak of £186,044.

Numbers from the building society show that after dipping 0.1% in September, the first drop since April 2013, house prices edged up by just 0.5% month-on-month in October dragging the annual gain down to 9%.

In September the year-on-year increase fell to 9.4% down from 11% in August and a peak of 11.8% in June – the highest since January 2005.

Notably the Bank of England has reported that mortgage approvals for house purchases dropped to a 14-month low in September while the latest surveys from both Hometrack and the Royal Institute of Chartered Surveyors (RICS) point to a reduction in buyer enquiries.

Hometrack reported that buyer enquiries fell 2.1% month-on-month in September, marking the fourth successive drop and larger than the 0.9% decline seen in both August and July. The Royal Institute of Chartered Surveyors reported that buyer enquiries fell for a third month running in September.

Howard Archer, 
chief UK and European economist
 at IHS Global Insight says: “The falling back of mortgage approvals from January’s peak level was clearly initially influenced appreciably by the introduction of the new Mortgage Market Review (MMR) regulations that came into effect in late April.

“With housing market activity clearly off its early-2014 highs, we suspect house prices will generally rise at a more restrained rate over the coming months. Specifically, we expect house prices to rise by around 1.0% overall in the fourth quarter of 2014. We see house prices rising by around 5% in 2015.”

Robert Gardner, Nationwide’s chief economist, added: “A variety of indicators suggest that the market has lost momentum.

“However, broader economic indicators remain positive. The labour market has continued to improve, with the unemployment rate falling to 6% in the three months to August and mortgage rates have fallen back towards all-time lows. Indicators of consumer confidence have also remained close to recent highs.

“If the economy and the labour market remain in good shape, activity is likely to pick up in the quarters ahead providing mortgage rates do not rise sharply.”

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