UK house prices are rising at their fastest annual rate in nearly two years, driven by falling borrowing costs and expectations that the Bank of England will continue to cut interest rates, according to Nationwide.
The building society reported that house prices in September were 3.2% higher than the same month last year, significantly outpacing the 2.4% annual growth recorded in August. This is the fastest increase since November 2022, when growth reached 4.4%.
The average UK house price stood at £266,094 in September, marking a 0.7% month-on-month rise from August and only 2% below the record highs seen in the summer of 2022.
Nationwide’s chief economist, Robert Gardner, explained: “In recent months, income growth has outpaced house price growth, and borrowing costs have eased as the Bank of England is expected to continue lowering interest rates. These factors have improved affordability for potential buyers, supporting a modest uptick in activity and prices, although both remain low by historical standards.”
Additionally, Bank of England data showed an increase in monthly mortgage approvals, rising to 64,900 in August from 62,500 in July, reflecting increased housing market activity as borrowing costs decline and wage growth holds strong. Net mortgage lending also grew to £2.9bn, up by about £100m from the previous month.
Consumer borrowing also rose slightly, with credit increasing from £1.2bn to £1.3bn, which economists suggest indicates the resilience of household finances. Ashley Webb, a UK economist at Capital Economics, noted that this is in line with the expectation that consumer spending will grow in the coming months.
The Office for National Statistics reported that the household saving ratio, representing the percentage of disposable income not spent, rose to 10% in the second quarter, up from 8.9% in the first quarter.
