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Nov 062017
 November 6, 2017

UK house price growth edged up to a three-month high in October according to Nationwide.

  • Annual house price growth picks up to 2.5%
  • Modest 0.2% month-on-month increase
  • N.B Full table of results at end of the article.

Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said: “The annual rate of house price growth picked up slightly in October to 2.5%, from a revised 2.3% in September.

“Nevertheless, annual house price growth remains within the 2-4% range that has prevailing since March. Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appears to be weighing on confidence. The lack of homes on the market is providing support to house prices.

“Economic growth was a little stronger than expected in Q3, increasing the likelihood of a rate rise on 2nd November (most likely to 0.5% from 0.25%). But, providing labour market conditions do not weaken significantly, the impact of a small rate rise on most UK households is likely to be modest.

“The proportion of borrowers directly impacted by a rate rise will be smaller than in the past, in part because the vast majority of new mortgages in recent years were extended on fixed interest rates. The share of outstanding mortgages on variable rates (and which are therefore likely to see an increase in payments if the Bank Rate is increased) has fallen to a record low of c40%, down from a peak of c70% in 2001.

“Moreover, a 0.25% increase in rates is likely to have a modest impact on most borrowers who are on variable rates. For example, on the average mortgage, an increase of 0.25% would increase monthly payments by £15 to £665 (equivalent to £180 per year).

“That’s not to say that the rise will be welcome news for many borrowers. Household budgets are under pressure from the fact that wages have not been rising as fast as the cost of living. Indeed, in real terms (i.e. after adjusting for inflation) wage rates are still at levels prevailing in 2005. Migration added to housing demand growth.

“One of the many factors that impacts housing demand is population growth. England’s population increased by 11% between 2001 and 2015 (from 49.4m to 54.8m). International migration has been an important driver, accounting for 60% (3.2m) of the change over the period.

“While this trend will have contributed to the increase in demand for housing, the size and nature of the impact depends on the size of the extra households that were formed. For example, migrants who live together in a house share will have less of an impact on housing demand than those living separately.

“Between 2011 and 2015, there was a 2% increase in the number of households in England (from 21.3m to 21.9m). The increase has been largely driven by those born outside of the UK, in particular from the EU.

“The number of households where the reference person was EU-born increased by 21% between 2011 and 2015 (to 1.2m or 5.4% of households), whereas the number of households where the reference person was non-EU born increased by 6% over the same period (to 2.2m, 10.3% of the total).


Headlines              Oct-17          Sep-17
Monthly Index         420.7             419.7
Monthly Change     0.2%              0.4%
Annual Change       2.5%              2.3%
Average Price         £211,085       £210,801