House Prices Rise 1% But Are 7% Below Peak

House price growth accelerated in October but the average cost of a home is still 7% below the record level measured in 2007.

The latest Nationwide House Price Index charted a 1% increase over the month following a 0.9% increase in September - with London and the South East continuing to drive the growth.

Nationwide said it meant that national annual price growth rose to 5.8% from 5% the previous month, leaving the cost of the average property at £173,678.

Commenting on the figures, its chief economist Robert Gardner said: "The UK housing market appears to be following the more resilient upward trend evident in the wider economy in recent quarters.

"The ability and willingness of potential buyers to transact has been steadily increasing.

There are concerns of unsustainable price increases because of low supply

"The ability to buy has been supported by continued gains in employment and policy measures such as the Help to Buy and Funding for Lending schemes, which have improved the availability and lowered the cost of credit.

"Mortgage rates are close to all time lows. The willingness of potential buyers to step into the market has also been increasing. 

While employment has been rising steadily for some time, it is only in the last few quarters that consumer sentiment has improved markedly.

"House price growth has accelerated as buyer demand has picked up more quickly than the supply of new homes. The risk is that if demand continues to strengthen while the supply of property remains constrained affordability could become stretched.

"Indeed, average wages have continued to decline in real terms even though employment growth has been fairly robust in recent years.

"Nevertheless, while house price growth has picked up, at a national level prices remain around 7% below their 2007 peak. 

Moreover, typical mortgage servicing costs remain modest by historic standards thanks to the ultra-low level of interest rates. A typical mortgage payment for a first time buyer is currently equal to around 29% of take home pay, in line with the long term average," he said.

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