UK House prices up says Nationwide

August 2009

Nationwide has said house prices rose 1.6 per cent in August, the fourth consecutive rise of their house price index.

The average price of a home according to the building society is now £160,224; with the rise underpinned by the historically low interest rate set by the Bank of England.

The monthly change in house prices from July was up 0.2 per cent, with the annual decline slowing from minus 6.2 per cent to minus 2.7 per cent. Nationwide say the housing market has been buoyed by low interest rates, but warns they will not stay this low forever.

Martin Gahbauer (corr), Nationwide's chief economist, said: "The exceptionally low level of interest rates offers some explanation for why house prices have not repeated the very sharp falls of 2008.

"There are two main channels through which the low level of interest rates has impacted the housing market. First, mortgage payments for existing homeowners - especially those with tracker or standard variable rate loans - have been reduced substantially.

"In addition to limiting the supply of second-hand homes, lower interest rates have also had an impact on the demand side. Even though house prices remain high relative to earnings, the fall in interest rates has improved the affordability of mortgages for those looking to buy a home.

"While low interest rates have clearly played a part in reversing the downward pressure on house prices, they are unlikely to stay at the current level forever. It is important to keep this in mind when interpreting recent price trends."