October house prices have increased by 1.3% to reverse falls seen in the previous two months, with the average house now costing £157,107, according to the latest Nationwide report.
Figures show the annual rate of growth now stands at 3.3%, up almost 2% from last month, but the report shows the rate remains subdued in comparison to this time last year when house price inflation was running at over 15%. The research reveals house prices in the three months to October have increased by 0.2%, which remains in line with the gently slowing trend seen throughout the year so far, and is a bounce back from the 0% increase in the quarter ending in September.
Although recent indicators have suggested there has been increased interest in the market, including a rise in the number of approvals for house purchases, the report claims it is too early to say the market has reached a turning point and that prices will continue to accelerate.
Due to the time delay in the house buying process the report suggests the increase in house prices may reflect the cut in interest rates in August, with borrowers who had already decided to buy a house postponing their action in anticipation of a widely predicted cut in interest rates. The research also points to this as a reason for the more subdued price movements in August and September.
Fionnula Earley, group economist for Nationwide, says: “While there is increased liquidity in the market now, we do not expect this will lead to a continued acceleration in house prices, more that stronger activity will act as a supporting cushion to the market. Overall the data this month suggests a stabilisation in the market rather than a turning point into a period of accelerating house prices. However, it will remain sensitive to movements in expectations, confidence and wider macroeconomic developments, especially in the labour market.”
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