UK house prices rise at fastest pace in two years

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UK house prices rose at their fastest annual pace in two years in September as falling mortgage rates boosted the property market.

Average property prices have risen 3.2% a year on average, up from 2.4% in August, the fastest rise since November 2022, according to new figures from mortgage lender Nationwide.

Economists polled by Reuters expected a 2.7% increase.

The monthly increase rate was 0.7%, which was faster than expected. The average house price in the UK is now $266,094, around 2% below its all-time high in the summer of 2022, according to Nationwide.

Robert Gardner, chief economist at Nationwide, said income growth has continued to outpace house price growth in recent months and borrowing costs have fallen slightly amid expectations the Bank of England will continue to cut interest rates. said.

These trends have helped improve affordability for prospective buyers and supported modest increases in activity and home prices, both of which remain subdued by historical standards, he said.

Record-low interest rates have led to a surge in house prices during the pandemic, but the real estate market has also been hit by a surge in borrowing costs as the BoE tries to lower inflation.

The property market is now recovering as lenders lower mortgage rates after the BoE cut interest rates by 0.25 percentage points in August.

BoE data released on Monday showed UK mortgage approvals rose more than expected, reaching their highest level since August 2022. Net mortgage approvals increased to 64,900 in August from an upwardly revised 62,500 in July.

Similarly, remortgage approvals increased from 25,200 to 27,200 over the same period, while the two-year mortgage interest rate for 60% loans fell from 4.8% in July to 4.55% in August, the BoE said. percent in June.

Stephen Perkins, managing director of mortgage broker Yellow Brick Mortgages, said the UK property market grew at supersonic speed in September. The continued rate cuts by lenders and strong wage growth have really started the market on fire. He believes the potential for the autumn budget to hamper demand is forcing people to take action now.

By region, Northern Ireland saw the fastest rise in house prices, up 8.6% year-on-year in the three months to September, more than three times the national average of 2.5%, national data showed.

The North of England continued to outperform the South, with prices in the south rising 3.1% year-on-year compared to a 1.3% increase in the south.

In London, where property prices are the most expensive, with an average of 525,000, price growth was lower than the national average of 2%.

Nationwide also reported that terraced house prices were the biggest riser over the past 12 months, up 3.5%, while apartments rose 2.8%.

Alex Kerr, economist at consultancy Capital Economics, said he expects home prices across the country to rise gradually over the remainder of the year, but as mortgage rates continue to fall, price growth could bounce back more strongly next year.

He said that if the BoE were to cut interest rates to 3% in early 2026, the resulting fall in mortgage rates would boost demand and house prices would gain further momentum next year.

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