House prices rise at fastest rate for four years

House prices jumped by an annual 5% in September, according to Nationwide’s latest House Price Index, the highest rate since 2016.

The average price of a home in the UK is now £226,129, the building society said, with prices having risen 0.9% month-on-month. Mortgage approvals for house purchases rose from around 66,000 in July to nearly 85,000 in August, the highest number since 2007.

Prices have been boosted by the Stamp Duty holiday and also people re-evaluating where they want to live now that many of us are working more from home.

Robert Gardner, chief economist at Nationwide said: “The rebound reflects a number of factors. Pent-up demand is coming through, with decisions taken to move before lockdown now progressing. The stamp duty holiday is adding to momentum by bringing purchases forward. Behavioural shifts may also be boosting activity as people reassess their housing needs and preferences as a result of life in lockdown.”

More movers buying than first time buyers

Surging house prices can make it harder for first time buyers to get on the property ladder, especially as many lenders have withdrawn or reduced the number of mortgages available to buyers with small deposits.

Movers are now more likely to buy a home than first time buyers, research by property website Zoopla found. It says that the gap between mortgaged homeowner activity and first time buyer activity is likely to widen further into next year.

Richard Donnell, research and insight director at Zoopla, said: “A change in the mix of buyers is supporting market conditions with sustained demand from equity-rich homeowners seeking more space and a change in location.

“In contrast, first time buyer demand is weakening. First time buyers have been a driving force of housing sales over the last decade. They remain a key buyer group but lower availability of higher loan-to-value mortgages and increased movement by existing homeowners means a shift in the mix of buyers into 2021.”

Although the number of first time buyer mortgages available has fallen in recent months, there are still options available for those with a 10% deposit. However choice is very limited and products come and go quickly whereas a bigger deposit helps to broaden the range of available lenders and rates.