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House prices continued to rise in August

Recent figures from the Nationwide Building Society have shown that UK house prices increased by 0.6% in August and were 3.5% higher than in August 2012. This latest rise means that the typical UK home is now worth around £170,514 on average.

Robert Gardner, Nationwide’s Chief Economist, explained that there were a number of factors that appeared to be contributing to the recent upturn in house prices. A key factor was consumer confidence, which has increased significantly in recent months, thanks to further modest gains in employment and signs that the UK economy is finally gathering momentum.

“An improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures such as the Funding for Lending and Help to Buy schemes, is also enabling more people to take their first steps into the property market,” added Robert Gardner. “Indeed, data from the Council of Mortgage Lenders suggests that the recent upturn in activity has been driven by first time buyers, who accounted for 45% of house purchase loans in Q2, the highest share since the series began in 2005.”

“Recent guidance from the Bank of England’s Monetary Policy Committee (MPC), that it intends to keep interest rates on hold at least until the unemployment rate reaches 7%, may also help support confidence amongst potential buyers. However, despite this guidance, there is still considerable uncertainty as to the future path of Bank Rate. The Bank of England’s central forecast is that the unemployment rate will not reach the threshold level of 7%, but financial market indicators continue to point to a first rate hike in mid-2015,” he concluded.

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