Nationwide has reported that UK house prices are at their fastest annual rate in nearly two years, as financing costs continue to decline amid anticipation that the Bank of England will continue to reduce interest rates.
The building society reported a price increase of 3.2% in September relative to the same month in the previous year, significantly surpassing the 2.4% annual growth noted in August, marking the highest rate since the 4.4% observed in November 2022.
In September, the mean residential property value in the UK stood at £266,094, reflecting a 0.7% increase compared to August and remaining 2% lower than the peak values observed in the summer of 2022.
Robert Gardner, chief economist at Nationwide, stated: “Income growth has consistently surpassed house price growth in recent months, while borrowing costs have slightly decreased in light of expectations that the Bank of England will persist in reducing interest rates in the upcoming quarters.”
“The observed trends have contributed to enhanced affordability for potential buyers and supported a slight uptick in activity and property values, although both metrics continue to be restrained relative to historical benchmarks.”
Lenders have recently decreased their rates on new mortgage deals, anticipating additional reductions in borrowing costs following the Bank of England’s decision to lower its base rate from 5.25% to 5% in August, marking its first cut since March 2020.
In its most recent assessment, the BoE maintained rates at 5% and indicated that although interest rates are trending downward, additional evidence is required to ensure they will stay low before implementing further reductions.
Lenders including Nationwide, Halifax, and HSBC are currently providing five-year fixed rates under 4% for buyers, marking the first occurrence of this since the beginning of the year.
Nationwide’s announcement last week regarding the provision of loans to first-time buyers at a ratio of six times their annual household income is evidence that banks have increased lending activity, according to recent data. Lloyds and Halifax have recently increased their borrowing limits to 5.5 times household incomes.
The nationwide data, which also captured performance during the third quarter, indicated that the rise in house prices in the northern region of England exceeded that of the southern region during the same timeframe.
The average house price in the north of England experienced a year-on-year increase of 3.1% over the three months leading up to September 2024, in contrast to a 1.3% rise observed in the south.
Northern Ireland exhibited the most significant growth during the period, with an 8.6% rise in house prices, whereas Scotland saw a 4.3% increase. Wales experienced an increase of 2.5%.
Terrace houses exhibited the most significant annual price growth, with the average cost rising by 3.5% in September. The mean price for a flat experienced an increase of 2.7%.
Gardner stated: “When analysing the long-term trends, it is evident that detached homes have maintained a marginal advantage over other property types, likely attributable to the ‘race for space’ phenomenon observed during the pandemic.”
“Since the first quarter of 2020, the average price of detached properties has experienced an increase of approximately 26%, whereas flats have seen a more modest rise of 15% during the same timeframe.”