United Kingdom house price inflation accelerated unexpectedly in October to the highest level in five months, the Nationwide Building Society said Thursday.
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House prices increased by 0.6 per cent in October and ticked up to 3.9 per cent on an annual basis, according to Nationwide’s latest index.
Mortgage lending rose 3.595 billion pounds on the month, the biggest net increase since April 2008, and amounting to annual growth of 2.2 percent – the biggest rise since January 2009.
British economic growth slowed more than expected in the three months to September, and economists are unsure about the extent to which strong consumer demand will offset a weakening global outlook.
Mr Gardner explained: “The proportion of new mortgage lending contracted on fixed rates has been steadily increasing since the low point in 2010, when less than half of lending was on fixed rates”.
As a result of the popularity of fixed-rate mortgage deals, the proportion of outstanding mortgages on variable interest rates has edged down from nearly 70% in mid-2012 to nearly half in mid-2015, he said.
‘Fixed rate mortgages have remained the most popular product type by a considerable margin in recent years, ‘ Gardner said.
“The upside for housing market activity and prices is expected to be constrained by more stretched house prices to earnings ratios, tighter checking of prospective mortgage borrowers by lenders and the likelihood that interest rates will start rising gradually during 2016”. “It is also important to note that the majority of recent fixes are for relatively short time periods – 65% were for two years and 30% for five years”.
The UK’s overall growth rate eased to 0.5 per cent in the third quarter, official figures showed last week, on the back of a marked slowdown in the construction sector.
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However, he said the housing market should be able to cope with any rate rises in the coming year, “provided the increase is modest and the economy and the labour market remains in good shape”. Policymakers have signaled borrowing costs could go up as soon as early next year, even though markets expect the rate rise to happen much later-even 2017.
