Thrifty Loans

Just when we thought we knew where house prices were heading –downwards – more news comes through to counteract those feelings. According to the well respected Nationwide house price index, the average cost of a home went up by a shock 1.1% in October, with annual house price inflation going back up towards double figures. This biggest monthly rise so far in 2007 comes in spite of weakening demand.

These figures suggest that house price inflation was at an annual rate of 9.7% – up from 9% in September – and the average cost of a property reached £186,044.

The Nationwide figures go against the recent trend. Property information specialist Hometrack revealed only a few days before that prices were down 0.1% in October – the first fall for almost two years, but not unexpected in today’s financial climate. In addition mortgage approvals were down in September to their lowest level for over two years, according to the Bank of England.

A three-monthly figure is seen as a more reliable guide to prices than monthly figures, which can be volatile, and the Nationwide three month figure to October was a rise of 1.9%. Nationwide chief economist Fionnuala Earley said the market was slowing, despite the Nationwide figures. She said: “While some may be tempted to interpret October’s numbers as a sign that house prices are immune to deteriorating affordability and tightening credit conditions, such a conclusion would be misguided. Most leading indicators of housing market activity are continuing to weaken. Surveyors are reporting the weakest levels of new buyer inquiries in many years and mortgage approvals are falling from recent highs amid weaker demand and tighter lending criteria for riskier borrowers.” She went on to say: “The overall result is that the stock of unsold homes is still relatively low, and this is providing some residual support to prices. The underlying dynamics of the market, however, are clearly not as strong as this time last year.”

Even if the property market experiences a prolonged period of slowdown, earnings would need to rise faster than house prices over the medium term for affordability to return to traditional levels.

Related posts:

1. Nationwide Reports Another Fall In House Prices
2. House Price Inflation Less Than 5% For The Year
3. House Prices May Fall In Real Terms, Says Governor
4. House prices being cut Countrywide
5. Report shows that house prices continue to plummet