This takes the average house price to £173,678, meaning the average house value has risen over £9,500 in the past year.
Prices are now at their highest level since April 2008 but are still 7% off their 2007 peak.
Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said:
“The UK housing market appears to be following the more resilient upward trend evident in the wider economy in recent quarters. House prices increased by 1% over the month in October, maintaining the momentum that has been building in the second half of 2013. After averaging less than 1% in the first half of the year, the annual pace of house price growth accelerated to 5.8% in October from 5% the previous month.
“The ability and willingness of potential buyers to transact has been steadily increasing. The ability to buy has been supported by continued gains in employment and policy measures such as the Help to Buy and Funding for Lending schemes, which have improved the availability and lowered the cost of credit. Mortgage rates are close to all time lows.
“The willingness of potential buyers to step into the market has also been increasing. While employment has been rising steadily for some time, it is only in the last few quarters that consumer sentiment has improved markedly (see chart). This may in part be the result of the improved performance of the wider economy. The UK economy expanded at a healthy 0.8% q/q pace in Q3 - the third consecutive increase and the fastest pace of growth for three years.
“House price growth has accelerated as buyer demand has picked up more quickly than the supply of new homes. The risk is that if demand continues to strengthen while the supply of property remains constrained affordability could become stretched. Indeed, average wages have continued to decline in real terms even though employment growth has been fairly robust in recent years.
“Nevertheless, while house price growth has picked up, at a national level prices remain around 7% below their 2007 peak. Moreover, typical mortgage servicing costs remain modest by historic standards thanks to the ultra-low level of interest rates. A typical mortgage payment for a first time buyer is currently equal to around 29% of take home pay, in line with the long term average.”
Peter Williams, Executive Director of the Intermediary Mortgage Lenders Association, comments:
“Thanks to the restoration of consumer confidence and improved access to lending there is renewed vigour in the market, as illustrated in the continuing upward trajectory in the Nationwide index.
“On their measure, the average house price has risen by 1% over the past month; with the current average sitting 5.8% higher than this time last year. Although there are concerns that a bubble is being formed around London and the South East, other indices confirm that growth is now being experienced in the majority of regions.
“Although it will take a while to come into full effect, the Help to Buy mortgage guarantee will provide the market with further impetus, so we expect to see house prices continue to rise until some limiting factors emerge.”
Jeremy Duncombe, Director of Legal & General Mortgage Club comments:
“The latest figures on house prices from Nationwide will continue to encourage speculation that prices are rising too quickly. Whilst it’s true that house price growth that significantly outpaces inflation is not good news if it persists over many months, it’s worth remembering how recently growth started and the position of the market only a few months ago. We also have to look at the wider regional picture where growth is much less striking. The momentum created by the various stimulus schemes should not be wished away too quickly.
Help to Buy has checks and balances built in to it. Being a temporary measure, if the Government needs to change its terms or withdraw it altogether to avoid the market overheating it can do so.
The main long term problem that the UK faces is the chronic lack of suitable housing. This constrained supply is the main issue to solve if we are to ensure a stable, balanced and sustainable UK housing market in the future.”
Andy Knee, Chief Executive of LMS, comments:
“Increased levels of competition in the property market are continuing to push house prices up further, with the average price currently sitting at 5.8% higher than this time last year. High rents and low returns on savings are continuing to draw people’s attention towards property, not only as somewhere to live but also as a means on investment.
“However, it is important to recognise the pressure that this increased demand is putting on the country’s limited supply of houses. Mortgage rates have never been so low, so if you were flirting with the idea of getting a mortgage there has never been a better time. If you are able to source the cash for a deposit and have found the property that you want, then snap it up before someone else does.”
