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House prices up 0.5% in January, says Nationwide House prices up 0.5% in January, says Nationwide
(about 1 hour later)
House prices moved up 0.5% in January, in a further sign that two years of static prices and historically low sales across the UK are coming to an end.House prices moved up 0.5% in January, in a further sign that two years of static prices and historically low sales across the UK are coming to an end.
Nationwide said the increase follows a period of flat prices and means that the average cost of a home now stands at £162,245.Nationwide said the increase follows a period of flat prices and means that the average cost of a home now stands at £162,245.
Estate agents have consistently reported over the past month that 2013 will see a rise in the number of transactions as demand picks up. The more settled picture for the economy as the euro crisis abates, and the schemes to improve mortgage lending, are cited as key factors in bringing more buyers back to the housing market.Estate agents have consistently reported over the past month that 2013 will see a rise in the number of transactions as demand picks up. The more settled picture for the economy as the euro crisis abates, and the schemes to improve mortgage lending, are cited as key factors in bringing more buyers back to the housing market.
However, the industry has remained sceptical about whether there will be any surge in prices, while the outlook remains weak and forecasters remain divided over the speed and nature of the recovery.However, the industry has remained sceptical about whether there will be any surge in prices, while the outlook remains weak and forecasters remain divided over the speed and nature of the recovery.
The Council of Mortgage Lenders recently reported an increase in lending to first-time buyers, which should also help some home-owners who are looking to sell their home and trade up.The Council of Mortgage Lenders recently reported an increase in lending to first-time buyers, which should also help some home-owners who are looking to sell their home and trade up.
The government launched its Funding for Lending scheme in August, which aims to unclog the flow of credit by giving lenders access to cheap finance. Lenders have been slashing their rates and the number of mortgages on the market has increased since the scheme started.The government launched its Funding for Lending scheme in August, which aims to unclog the flow of credit by giving lenders access to cheap finance. Lenders have been slashing their rates and the number of mortgages on the market has increased since the scheme started.
The Bank of England reported yesterday that mortgage lending to home buyers in December was at its highest for nearly a year, though approvals remain low compared with long-term norms at 55,785 in December. Economists estimate that a level of 70,000-80,000 is consistent with stable house prices. The Bank of England reported on Wednesday that mortgage lending to home buyers in December was at its highest for nearly a year, though approvals remain low compared with long-term norms at 55,785 in December. Economists estimate that a level of 70,000-80,000 is consistent with stable house prices.
Robert Gardner, Nationwide's chief economist, said: "There have been tentative signs of a pick-up in activity in recent months.Robert Gardner, Nationwide's chief economist, said: "There have been tentative signs of a pick-up in activity in recent months.
"The Funding for Lending scheme has achieved some success in bringing down mortgage rates, with some signs of a pick-up in lending activity."The Funding for Lending scheme has achieved some success in bringing down mortgage rates, with some signs of a pick-up in lending activity.
"Hopefully, the momentum will continue to build in the months ahead, though much will depend on whether the wider economic environment improves.""Hopefully, the momentum will continue to build in the months ahead, though much will depend on whether the wider economic environment improves."
Howard Archer, chief UK economist at IHS Global Insight, said he forecasted flat prices for 2013, as extended low interest rates and the beneficial impact of the central bank's lending scheme are offset by difficult economic conditions.Howard Archer, chief UK economist at IHS Global Insight, said he forecasted flat prices for 2013, as extended low interest rates and the beneficial impact of the central bank's lending scheme are offset by difficult economic conditions.
He said: "On the negative side, house prices are likely to be held down by still relatively limited market activity (despite the recent modest pick-up), relatively low and fragile consumer confidence, and muted earnings growth. And while we believe that the economy will pick up gradually as 2013 progresses, we doubt that growth will be fast enough for some time to provide significant support to the housing market.He said: "On the negative side, house prices are likely to be held down by still relatively limited market activity (despite the recent modest pick-up), relatively low and fragile consumer confidence, and muted earnings growth. And while we believe that the economy will pick up gradually as 2013 progresses, we doubt that growth will be fast enough for some time to provide significant support to the housing market.
"However, some support for house prices should come from recent decent employment growth and likely extended low interest rates, while mortgages appear to be becoming increasingly available and a little cheaper, helped by the Funding for Lending scheme.""However, some support for house prices should come from recent decent employment growth and likely extended low interest rates, while mortgages appear to be becoming increasingly available and a little cheaper, helped by the Funding for Lending scheme."
The building society's latest study said that despite the improved mortgage market, first-time buyers still typically need to put down a 20% deposit, compared with 10% before the financial crisis.The building society's latest study said that despite the improved mortgage market, first-time buyers still typically need to put down a 20% deposit, compared with 10% before the financial crisis.
The average first-time buyer home costs 4.4 times average earnings, which is above the 20-year average of 3.6 times but well below the high of 5.4 recorded in 2007, Nationwide said.The average first-time buyer home costs 4.4 times average earnings, which is above the 20-year average of 3.6 times but well below the high of 5.4 recorded in 2007, Nationwide said.