House prices up for fourth month says Nationwide
Nationwide has said house prices rose 1.6 per cent in August
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Thursday, 27, Aug 2009 02:06
By Sarah Garrod.
Nationwide has said house prices rose 1.6 per cent in August, the fourth consecutive rise of its house price index.
The average price of a home according to the building society is now £160,224; with the rise underpinned by the historically low interest rate set by the Bank of England.
The monthly change in house prices from July was up 0.2 per cent, with the annual decline slowing from minus 6.2 per cent to minus 2.7 per cent. Nationwide says the housing market has been buoyed by low interest rates, but warns they will not stay this low forever.
Martin Gahbauer, Nationwide's chief economist, said: "The exceptionally low level of interest rates offers some explanation for why house prices have not repeated the very sharp falls of 2008.
"There are two main channels through which the low level of interest rates has impacted the housing market. First, mortgage payments for existing homeowners - especially those with tracker or standard variable rate loans - have been reduced substantially.
"In addition to limiting the supply of second-hand homes, lower interest rates have also had an impact on the demand side. Even though house prices remain high relative to earnings, the fall in interest rates has improved the affordability of mortgages for those looking to buy a home.
"While low interest rates have clearly played a part in reversing the downward pressure on house prices, they are unlikely to stay at the current level forever. It is important to keep this in mind when interpreting recent price trends."
Earlier this week the British Bankers Association (BBA) showed approvals for mortgages among the high-street banks in July were 77 per cent higher than a year ago. But housing experts have warned unemployment could be the key issue to preventing a full recovery of the housing market this year.
Nick Hopkinson, director of Property Portfolio Rescue (PPR), said: "The latest data shows that house prices have stabilised recently but on 'wafer thin' sales volumes, as homeowners sit tight amidst the wider economic uncertainty.
"With unemployment continuing to soar and securing a new mortgage almost impossible for most borrowers we are likely to see prices falling back again later this year as the peak summer buying season ends."
And the National Association of Estate Agents (NAEA) has said the government must continue to aid the beleaguered housing market. President of the NAEA Gary Smith, said: "Whilst it is true that conditions in many areas across the country remain tough, we must now concentrate on how the government and major lenders can build on this evidence of new consumer confidence to further consolidate what will no doubt be the lynch-pin of general recovery in the UK economy."