Nationwide: UK house prices growing at fastest rate since end of 2022

Average house prices rose by the fastest rate for two years during September as falling mortgage pricing continues to boost buyer demand.

The latest Nationwide House Price Index shows the average UK house price rose by 3.2% annually in September and by 0.7% on a monthly basis.

It puts average UK property prices at £266,094 and is the fastest pace of growth since November 2022 when average values rose 4.4%.

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Average prices still remain around 2% below the all-time highs recorded in summer 2022 though.

The latest rise comes as the property market has been boosted by August’s interest rate cut, mortgage rates dropping and inflation staying closer to the Bank of England’s 2% target.

Wage growth also remains high, adding to buyer purchasing power and giving people more confidence when it comes to buying a property.

“Income growth has continued to outstrip house price growth in recent months while borrowing costs have edged lower amid expectations that the Bank of England will continue to lower interest rates in the coming quarters,” says Robert Gardner, chief economist at Nationwide.

“These trends have helped to improve affordability for prospective buyers and underpinned a modest increase in activity and house prices, though both remain subdued by historic standards.”

Strong September for the property market

Most UK regions saw a pickup in annual house price growth during September, the Nationwide figures show.

Northern Ireland recorded the highest level of growth, with average prices up 8.6% compared with the third quarter of 2023.

Average prices in Scotland rose 4.3% annually, while Wales saw a more modest 2.5% year-on-year rise.

Across England overall, typical prices were up 1.9%. The North West was the best performing English region, with prices up 5.0% year-on-year. 

There remains a regional divide with prices across the north up 3.1% annually compared with 1.3% in the south.

London remained the best performing southern region with annual price growth of 2.0%. East Anglia was the only UK region to record an annual price fall, with prices down 0.8%.

There are also differences when it comes to the type of property. Terraced houses have seen the biggest percentage rise in prices over the last 12 months, with average prices up 3.5% in September, Nationwide said. Semi-detached homes and flats saw increases of 2.8% and 2.7% respectively, whilst detached houses saw more modest growth of 1.7%.

Will house prices rise or fall this year?

Many analysts had started the year with dire predictions of house price declines amid recession fears, high interest rates and sticky inflation.

But as the year progressed, the UK economy emerged out of recession quickly, inflation has slowed to the Bank of England’s 2% target and interest rates were cut from 5.25%to 5% in August, with more expected in the coming months.

Mortgage lenders have already begun cutting pricing in response.

This is feeding into buyer activity and the latest Bank of England data show the number of mortgage approvals rose by 3.8% in August.

"The latest Bank of England money and credit statistics for August, combined with this morning’s house price growth figures from Nationwide, paint a picture of a UK housing market that is regaining momentum amid easing borrowing costs and renewed buyer activity,” says Rosie Hooper, chartered financial planner at Quilter Cheviot.

"The fall in mortgage rates has been a key driver of this trend. With the Bank of England holding its base rate at 5% in its last review, and lenders offering five-year fixed rates at the 4% mark means the environment has become more favourable for buyers. Many lenders have also increased their lending limits, with some now offering loans of up to six times household income.”

Tom Bill, head of UK residential research at Knight Frank, said demand has also been boosted by buyers putting off decisions until after the election.

But he suggests the Autumn Budget and fears of tax rises may change the housing market’s fortunes, adding: “The mood has since turned more cautious ahead of the Budget following suggestions by the government it will be painful.

“We think prices will end the year a few percent higher but sellers should be aware that buyer exuberance will be in short supply in the final months of the year.”