August house price increase undeterred

Despite gloomy forecasts about the UK property market, the latest survey by Nationwide, the UK’s largest building society, shows house prices rising at their fastest pace in three months.

The mortgage lender has reported that the cost of a home rose by 0.7% between August and September, bringing the average price to £184,723.

Fionnuala Earley, Nationwide’s chief economist, described the reasonably strong gain as evidence of the market “seemingly shrugging off the unsettled events of the past month”.

The August/September figure compares with a rise of 0.6% in July/August, however, annual growth in house prices is continuing to fall and was down to 9% in August, as compared with 9.6% in August 2006.

In August of this year, the average standard variable mortgage rate rose to a nine-year high of 7.69%. Lenders also increased their tracker mortgage rates.

As a result, analysts are continuing to forecast a decline in annual house price growth and according to Ms Earley, “wholesale funding costs are now clearly leading to a reassessment of the pricing of credit in the mortgage market”.

Only this week, Barratt Developments, the housebuilder, reported a fall in demand for new homes.

At the same time, Rightmove and the Royal Institution of Chartered Surveyors are both warning that the boom of the past few years is coming to a halt.

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