Property values up 4.4%

House prices3

UK house prices have increased over the past 12 months and are set to continue rising, according to the latest data.

Nationwide Building Society’s monthly House Price Index reveals that property values were 4.4 per cent higher in November 2016 than at the same point in 2015.

The report also highlighted a marginal increase on the average price recorded in October, with a 0.1 per cent rise in month-on month values.

The steady rise is in line with the growth rate witnessed for the past two years, according to Nationwide, which expects the pattern to continue in the foreseeable future, albeit at a marginally slower pace.

Strengthening conditions

Robert Gardner, Nationwide chief economist, said there are signs that conditions have strengthened in recent months, reflecting the impact of a solid labour market and historically low borrowing costs.

The report also showed that mortgage approvals were higher in October, with surveyors reporting that new home buyer enquiries increased.

Mr Gardner added that the demand and supply balance is likely to remain fairly tight in the quarters ahead, even if economic conditions change, as is expected by some forecasters.

Mortgage market trends

When it comes to borrowing, fixed rate mortgages remain the most popular product type by a considerable margin, with data from the Council of Mortgage Lenders indicating that more than 90 per cent of new mortgages taken out over the past 12 months were on fixed rate terms.

This is likely driven by a desire to take advantage of record low interest rates, which have combined with groundbreaking fixed rate offers to provide home buyers with a wide range of attractive low-rate deals.

In October, the average two-year fixed rate for those with a 25 per cent deposit was 1.51 per cent, which is over two percentage points below 2012 levels.

Mr Gardner commented: “The proportion of new mortgage lending contracted on fixed rates has increased considerably since the low point in 2010, when less than half of lending was on fixed rates.

Fixed rate deals

Borrowers taking out fixed rate mortgages have benefited from historically low interest rates, and buyers with a ten per cent deposit are currently taking advantage of two-year fixed rates that are the lowest on record, at 2.42 per cent.

Nationwide data shows that in recent years, the proportion of lending accounted for by fixed rate deals has persisted at levels well above those prevailing in the mid-noughties.

Fixed rate deals continue to be most popular among first-time buyers, for whom certainty over monthly payments is likely to be particularly important, with 95 per cent of new mortgage lending to first-time buyers in 2016 being on fixed rate terms.

The report follows the Knight Frank and IHS Markit monthly House Price Sentiment Index, which revealed that the majority of households believe that the price of their home increased in November 2016.

The outlook for future house price growth is also strong, with many households confident that the value of their homes will continue to increase over the next 12 months.

Use our mortgage calculator, created with the Mortgage Advice Bureau, to work out the best deal for you.

 

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