In the 12 months to August 2013, the ONS reports, UK house prices increased by 3.8%, up from a 3.3% increase in the 12 months to July 2013. House price growth remains stable across most of the UK, although prices in London are increasing faster than the UK average. The year-on-year increase reflected growth of 4.1% in England, 1.1% in Northern Ireland and 1.0% in Wales, although this was offset by a fall of 0.7% in Scotland.
In August 2013, the UK HPI surpassed its previous peak in January 2008 (185.5) by 0.3%.
Annual house price increases in England were driven by London (8.7%), the East Midlands (3.8%) and the West Midlands (3.5%) - excluding London and the South East, UK house prices increased by 2.1% in the 12 months to August 2013.
On a seasonally adjusted basis, UK house prices increased by 0.5% between July and August 2013.
In August 2013, prices paid by first-time buyers were 4.9% higher on average than in August 2012. For owner-occupiers (existing owners), prices increased by 3.3% for the same period.
However, the news may add to concerns that the UK is in danger of a house price "bubble".
Sir Jon Cunliffe, the new deputy governor of the Bank of England said:
"In terms of whether it leads to households becoming overexposed, because they can borrow higher amounts, there is is a possibility it could do that, and that would create more of a risk."
David Brown, commercial director of LSL Property Services, comments:
"There’s an air of bullish confidence surrounding the housing market at the moment. Prices are at record highs, demand is bubbling away nicely, and both borrowers and lenders seem to be convinced the economic downturn is well and truly a thing of the past. There are sure signs that the economy is on-track towards a complete recovery.
"Such fervent consumer demand must also be satisfied by an increase in the supply of affordable homes if we are to maintain accessibility and avoid prices rising beyond reach of aspirational homeowners.
"Despite the greater mortgage availability, some may hold off on entering the market for the time being, in a bid to see wages increase and accrue a little more savings – something that has been significantly helped by the healthy state of the private rental market, which has seen relatively low inflation in recent months."
Richard Sexton, director of e.surv chartered surveyors, commented:
"The housing market is rollicking along. Banks are more willing to lend to borrowers with low deposits. Consumer confidence is on the rise. And Help to Buy is set to open the door to thousands more buyers over the coming months. Make no mistake, the scheme is desperately needed by borrowers across the country, from Hampstead to Harrogate, from Wimbledon to Walsall. Borrowers everywhere want help. There are plenty of wannabe buyers in London with decent jobs who can’t possibly save for a 20% deposit without assistance. Inflation continues to ransack personal finances, savings rates are low, and so is wage growth. People need help saving for the deposits which house price rises are making more expensive.
"The Help to Buy scheme is sensible. It isn’t sub-prime lending. Rates on mortgages have been priced fairly high and credit checks are stringent. The real issue is a lack of house building, which could send house prices even further skywards. More homes need to be built to cater for demand and keep the housing market affordable for the many, not the equity-rich few."
Ben Thompson, Managing Director of Legal & General Mortgage Club comments:
"Continued rises in house prices indicate that confidence has started to return to the market. This has been helped in part by Government initiatives such as Help to Buy 2. Our own research supports this, with 31% of UK consumers stating that they feel more confident about buying a home today than they did 12 months ago.
"Whilst these rises are positive for those already on the ladder, over inflated prices make the dream of homeownership harder still for those still renting and looking to buy in the future.
"Ideally house prices would grow slowly, at or below the level of inflation, over a number of years. Increasing the availability of housing stock is the best way to meet the growing demand. Affordable new homes need to be built in the right parts of the UK enabling house prices to stabilise, and creating a more sustainable market place."
Nicholas Ayre, managing director of home buying agency Home Fusion, says:
"House prices continue to rise so it is no surprise that first-time buyers are also having to pay more with prices 4.9 per cent higher than in August last year. For those worrying about a house-price bubble, this will only fuel those concerns. But record low mortgage rates generally mean that affordability is not an issue - yet. However, this is something that does need keeping an eye on and borrowers must ensure that they don't overstretch themselves.
"Both Lloyds and Royal Bank of Scotland have reported high levels of interest from borrowers keen on using the second phase of Help to Buy but whether that will actually feed through to completions once borrowers have seen the rates available, and whether they meet the criteria for borrowing at such a high loan-to-value, remains to be seen."
