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UK average house price hits record high

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House prices
A couple view properties for sale in an estate agents window in London. Photo: Peter Nicholls/Reuters

The price of a typical UK home passed the £250,000 ($340,757) mark in October, an increase of more than £30,000 since the pandemic struck in March 2020, new data revealed.

Nationwide’s latest house price index showed that annual house price growth remained elevated at 9.9% last month and prices rose 0.7% in month-on-month terms, after taking account of seasonal effects.

Demand for homes has remained strong, despite the expiry of the stamp duty holiday at the end of September.

Mortgage applications remained robust at 72,645 in September, more than 10% above the monthly average recorded in 2019.

“Combined with a lack of homes on the market, this helps to explain why price growth has remained robust.,” said Robert Gardner, Nationwide's chief economist.

Watch: How much money do I need to buy a house?

He added that the outlook remains “extremely uncertain.”

“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."

Read more: Property prices will continue rising across Europe, says S&P Global report

But he said a number of factors suggest the pace of activity may slow. For one, it is unclear how the wider economy will respond to the withdrawal of government support measures.

And consumer confidence has weakened in recent months, partly as a result of a sharp increase in the cost of living.

“Even if wider economic conditions continue to improve, rising interest rates may exert a cooling influence on the market, though the impact on existing borrowers is likely to be modest".

Commenting on increased speculation that the Bank of England’s Monetary Policy Committee will increase interest rates in the coming months, Gardner said that if the economy does not weaken significantly, the impact of a limited rise in interest rates on UK households is likely to be modest. 

"This is partly because only a relatively small proportion of borrowers will be directly impacted by any change."

Meanwhile managing director of Barrows and Forrester, James Forrester, said any market uncertainty "is merely a drop in the ocean compared to the last 18 months and so the chances of a house price decline this side of Christmas are slim, to say the least."

He added that "we’re still seeing an incredibly high level of market activity despite the end of the stamp duty holiday and while there are murmurs of an increase in interest rates, this is unlikely to deter the average homebuyer who will continue to benefit from a very favourable cost of borrowing.”

Watch: Should I move in with my parents to save money?

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