House prices continue to climb

House prices up

House prices continued to climb in August, according to the latest Nationwide house price index.

The building society's monthly barometer found that across the UK property prices were up by 0.6% for the month, and are 3.5% higher than the same time last year.

The average UK home is now worth £170,514.

Mortgage approvals are also up, having reached their highest level since March 2008, and Samuel Tombs, UK economist at Capital Economics, says the figures may "fuel speculation that the housing market is in the early stages of another boom".

However he points out that the number of approvals is still 40% lower than the levels seen in the decade leading to the financial crisis. "The recent rise in wholesale interest rates may soon feed through to mortgage rates and so take some pace out of the recovery," he adds.

Meanwhile, research from Lloyds TSB suggests the improvement in the housing market is limited to first time buyers, and movement for "second-steppers" is flat, with many trapped in negative equity after buying their first home at the market's 2007 peak.

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Lloyds TSB housing economist Nitesh Patel says this is "in sharp contrast to the number of first-time buyers growing by close to 20%" in the first six months of the year.

Figures from Lloyds also highlight the regional variation, with the north much more affordable for second-steppers. The bank calculates that the East and West Midlands are the most affordable areas, with London and the South East and South West the least.

This article was written for our sister website Money Observer