Annual house price growth of 9.9% in October saw the average UK property price clear the quarter-million-pound watermark for the first time, shows Nationwide data.
At £250,311, this means the average price has increased by more than £30,000 since the start of the pandemic and, as The Guild of Property Professions chief executive Iain McKenzie points out: “In November 2011, the average house cost £167,757”. This equals prices having “risen by half in ten years,” he continues.
Nationwide remarks that demand has remained strong despite the stamp duty holiday expiring in September, with 72,645 mortgage applications sent to the lender in September, 10% above the monthly average recorded in September 2019.
And the bank’s chief economist Robert Gardner says that if the labour market “remains resilient, conditions may stay fairly buoyant in the coming months – especially as the market continues to have momentum and there is scope for ongoing shifts in housing preferences as a result of the pandemic to continue to support activity.”
He adds, however, that the pace of activity could slow because, “it is still unclear how the wider economy will respond to the withdrawal of government support measures.”
Many market watchers believe the Bank of England will push rates up slightly tomorrow, 4 November, and gradually more so in the months following.
Gardner says: “investors expect [the] bank rate to be increased from its current record low of 0.1% before the end of the year – most likely to 0.25% or 0.5% – and perhaps reaching 1% within a year, though markets project they will remain close to that level in five years’ time.”
He concludes the impact of this is “likely to be modest,” with the share of outstanding mortgages on a variable interest rate at its lowest level on record, at circa 20% (in 2011 this metric stood at 60%).
Carl Summer Financial Services adviser Scott Taylor-Barr comments: “These are strange times indeed when a potential small rise in rates to a level they were only a short time ago is perceived as an end of days scenario.
“Mortgage rates may be increasing, but if they are moving from, say, 0.99% to maybe 1.34%, it’s not going to suddenly make mortgages unaffordable for people and the demand for property will not collapse.”
And Peak Mortgages and Protection managing director Rhys Schofield says: “October was our busiest month since June so we saw no slowdown at all in the property market.
“If there was one notable, albeit fully understandable development, it was the growing focus on remortgages as people seek to hedge against rate rises to come.
“The property market isn’t going to collapse, as there is simply too much demand for any new property that hits the portals, with new stock being snapped up in an instant.
“There is simply not enough available stock on the market to keep up with demand. People want to move and there are bottlenecks everywhere. We need to make it easier for people to move home, and the conveyancing market needs a massive shake-up.”
Meanwhile, MT Finance director Tomer Aboody says: “A slowdown doesn’t seem to be on the cards just yet. With interest rates still at their lowest level on record and employment robust, demand and affordability remain strong.”
He adds: “As we head towards a less stable position with an imminent interest rate rise, just as government support comes to an end, surely there will be a shift. This rate of growth simply can’t go on forever.”
