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UK house prices rise at fastest pace in 17 years, fuelled by cheap mortgages and government subsidy

Ben Chapman
·3-min read
 (PA)
(PA)

UK house prices are growing at their fastest pace for more than 17 years, fuelled by low mortgage interest rates and a stamp duty holiday, according to Nationwide.

The building society reported a £16,000 rise in the average sold price in April compared to the same month a year ago.

Its monthly index found that the average price for a home hit a new record high of £238,831, up 7.1 per cent in a year.

Between March and April alone, prices rose 2.1 per cent. Not since February 2004, during the property boom which resulted in the global financial crisis, has Nationwide seen such a rapid monthly increase.

The chancellor announced further measures to inflate house prices during his March Budget speech. The government has reintroduced government-backed loans for people with small deposits and extended the stamp duty holiday, which gives a tax break of up to £15,000 on property purchases.

The latest figures will add to concerns that the housing market is going through a bubble inflated by cheap debt and government subsidies.

“Just as expectations of the end of the stamp duty holiday led to a slowdown in house price growth in March, so the extension of the stamp duty holiday in the Budget prompted a reacceleration in April,” said Robert Gardner, Nationwide’s chief economist.

He added: “Housing market activity is likely to remain fairly buoyant over the next six months as a result of the stamp duty extension and additional support for the labour market included in the Budget, especially given continued low borrowing costs and with many people still motivated to move as a result of changing housing preferences in the wake of the pandemic.”

Experts predicted that runaway house price inflation would accelerate this year. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that annual house price growth of at least 10 per cent by June “looks likely, given the continued strength of demand indicators”.

“For instance, Google Trends data indicate that visits to one of the three main property websites this month have been 29 per cent above their average for the time of the year, a step up from 25 per cent above in March.

“Similarly, the number of registered house hunters per estate agents’ branch in March was 24 per cent above its average level in the 2010s, a small rise from 23 per cent in February, according to the National Association of Estate Agents.”

He added: “Further ahead, however, we expect prices to dip in quarter four, primarily in response to the eventual return of the threshold for stamp duty to £125,000, from £250,000 in quarter three and £500,000 at present.

Guy Harrington, chief executive of lender Glenhawk, warned that the “honeymoon” won’t go on forever.

“The longer the current unsustainable levels of house price growth continues, the sharper and more painful the eventual correction will be,” he said.

“The stamp duty holiday and higher household savings because of the restrictions might paint a positive picture till autumn, but we will see reality set in once the support schemes end and the scale of slowdown then might catch many by surprise.”

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