What is going on with house prices?
House prices rose for the fourth consecutive month in October but remain down 4.7% on an annual basis, according to the latest survey from Halifax.
Both surveys show a rise in values in October. According to Halifax, the value of the average property lifted 1.2% last month to £165,528 amid stronger demand, the low level of homes on the market and a pick-up in consumer confidence.
However, according to Nationwide, prices rose by just 0.4% in October brining the average property to £162,038 – 2% higher than a year earlier.
Both Nationwide and Halifax take an average of property valuations at the point at which a mortgage offer is made, and include homes from across the UK adjusted to factor in the season of the year and filter out ‘micro-markets’.
But, even though they use the same criteria, the two lenders do not always achieve the same results.
One thing both lenders appear to agree on is that house price rises are not sustainable.
Martin Gahbauer, chief economist at Nationwide, says: “It appears that actual house price inflation has moved somewhat ahead of what was indicated by consumer expectations. This could signal a period of moderation in house price inflation ahead, which is fully consistent with October’s less pronounced increase in prices.”
One factor continually blamed for the weak housing market has been the low levels of mortgage approvals. This has improved in recent months; figures from the Bank of England last week revealed that the number of home loans approved rose by 3,000 to 56,000 in September – the highest level since March last year and the 10th consecutive monthly rise.
However, Martin Ellis, housing economist at Halifax, is not convinced this will be enough to support house price inflation, as activity remains "very low".
He adds: "There are some indications that more people are deciding to put their homes on the market, encouraged by the recent improvement in market conditions. A continuation of this trend could help to improve the balance between supply and demand, curbing the strength of the stimulus to house prices resulting from the current imbalance."
Gahbauer points out that the pick-up in mortgage approvals for house purchases - which has been helping to bolster property values - has lost some momentum in recent months.
External house experts agree. Howard Archer, chief economist at IHS Global Insight, remains cautious of the housing market 'recovery'.
He says: “Despite the further significant rise in house prices reported by Halifax in October, we remain highly doubtful that the house price rally seen since early-2009 can be sustained for much longer."
Despite low interest rates helping keep mortgage cheap, Howard warns that rising unemployment and stagnant earnings growth will hold property prices back.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.