House prices surge 10% as Bank of England ponders interest rate rise

·2-min read
For sale and sold signs outside properties in London (PA)
For sale and sold signs outside properties in London (PA)

House prices surged almost 10 per cent in the year to October as the property market shrugged off the end of the stamp duty holiday, a new survey revealed on Wednesday.

The average cost of a home across the UK rose 0.7 per cent in the month and 9.9 per cent over the year to an average of £250,311, the first time it has topped the quarter of a million pounds mark, according to lender Nationwide.

The latest indication of the heat of the property market become amid rising City expectations that the Bank of England will increase interest rates on Thursday for the first time in more than three years.

The Bank’s Monetary Policy Committee will announce at noon whether to raise the official cost of borrowing from the record emergency low rate of 0.1 per cent.

Any rise is likely to be modest, probably to 0.25 per cent, adding only around £20 a month to the cost of a typical London first time buyer’s £250,000 variable rate or tracker mortgage.

The vast majority of home owners will notice no difference - initially anyway - as about four out of five mortgages are locked into fixed rates.

Nationwide chief economist Robert Gardner said: “Demand for homes has remained strong, despite the expiry of the stamp duty holiday at the end of September. Indeed, mortgage applications remained robust at 72,645 in September, more than 10 per cent 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.

“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.”

The London property market is reported to be particularly strong this Autumn, although there was no regional breakdown in Wednesday’s Nationwide data.

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