- Annual UK house price growth increased to 12.6% in February, from 11.2% in January.
- Prices up 1.7% month-on-month.
- Average house price exceeds £260,000 for first time.
- Price of typical home 20% higher than February 2020.
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said:
“Annual house price growth accelerated to 12.6% in February, up from 11.2% in January and the strongest pace since June last year. Prices rose by 1.7% month-on-month, after taking account of seasonal effects, the seventh consecutive monthly increase.
“The price of a typical home rose above £260,000 for the first time in February, an increase of £29,162 over the past 12 months. This is the largest ever annual increase in cash terms since the start of our monthly index in 1991. The price of a typical home is now £44,138 (20%) higher than in February 2020 – the month before the pandemic struck the UK.
“Housing market activity has remained robust in recent months, with mortgage approvals continuing to run above pre-pandemic levels at the start of the year. A combination of robust demand and limited stock of homes on the market has kept upward pressure on prices.
“The continued buoyancy of the housing market is a little surprising, given the mounting pressure on household budgets from rising inflation, which reached a 30-year high of 5.5% in January, and since borrowing costs have started to move up from all-time lows in recent months.
“The economic outlook is particularly uncertain at present. Nevertheless, it is likely that the housing market will slow in the quarters ahead. The squeeze on household incomes is set to intensify, with inflation expected to rise above 7% in the coming months.
“Housing affordability has already become more stretched, in part because house price growth has been outstripping earnings growth by a wide margin since the pandemic struck. The price of a typical home is now equivalent to 6.7 times average earnings, up from 5.8 in 2019.”
Despite the impact of the pandemic, the UK property market has surged over the past couple of years, with a rush to buy or move home contributing to the exceptional asset price growth witnessed.
However, with a cost of living crisis and the Bank of England now hiking interest rates, there are fears that the property market could slow quickly.
A return to the office is another factor that could constrain further house price growth, as the search for more indoor space for working from home is no longer critical.
Despite rising interest rates, there are still cheap mortgage deals available if you can find the right property.
Even a third successive interest rate hike from the Bank of England this month would keep the cost of borrowing very low by historical standards.
To ensure long-term affordability, those hunting for a home need to consider a range of interest rate scenarios, even if fixing a mortgage deal for several years.
It is more important than ever to seek professional advice about the cost and availability of borrowing in this frantic property market before putting forward bids for your dream home.