House prices up 9.9% in 12 months

Banbury Cake: House prices are increasingly strongly across most parts of the UK, according to the ONS House prices are increasingly strongly across most parts of the UK, according to the ONS

House prices have leapt by 9.9% over the last year to reach a new high of £260,000 typically in April, official figures show.

The annual increase marks the strongest uplift seen in nearly four years and prices are "increasing strongly across most parts of the UK", an Office for National Statistics (ONS) report said.

London is continuing to record the strongest growth, with values there having surged by 18.7% over the last 12 months to reach £485,000 on average.

On a month-on-month basis, values jumped by 2% across the country, compared with an increase of 0.2% in average prices during the same period a year earlier.

The figures also show that first-time buyers face having to pay 10.7% more to get on the property ladder than they did a year ago, with the typical starter home now costing £199,000.

The figures add to a slew of reports which point to house prices continuing on a strong upward march, despite some evidence that potential buyers are starting to behave more cautiously amid concerns that parts of the market are overheating.

They will add to speculation that further steps could be recommended by the Bank of England to calm the market, which could possibly include diluting the Government's flagship Help to Buy scheme to help buyers with low deposits.

Critics of the scheme have argued it has been adding to the pressure on demand for homes and helping to fuel sellers' price expectations as consumers' confidence in the economy improves generally.

But the Government has said the scheme is working as intended to reach people who need its help the most.

The Bank's financial policy committee was meeting today, although a report from that meeting is not due to be released until later this month.

Last week, Chancellor George Osborne unveiled plans to hand the Bank powerful new tools which would enable it to cap the size of mortgage loans as a share of the borrower's income or the value of the house.

Mr Osborne emphasised that the market does not pose an immediate threat to financial stability now, but he also said it is important to take action to insure against any repeat of a period of boom and bust.

The Bank has dropped hints that interest rates could rise sooner than expected, which would add to the costs of mortgage holders - although any increase is expected to be gradual.

Every region has seen property values increase over the last year, from London's 18.7% uplift to a 2.6% annual rise in Northern Ireland.

The new ONS figures also highlighted the fact that while prices are racing ahead in some areas of the South, other areas of the UK still have a way to climb before prices reach their previous highs. The report said that if London and the South East were removed from the findings, average UK house prices would stand at just £199,000.

Property values have jumped by 10.4% across England over the last year to reach £271,000 on average, marking the strongest annual increase seen in English prices since 2010. England remains the only UK nation where prices are now higher than their pre-crisis peak in 2008.

The house price index for London is now sitting 31.6% above the pre-financial crisis peak reached for the English capital in 2008.

Across the English regions, the North East has the lowest average house price at £152,000, although prices there have seen a significant 6.8% increase over the last year.

An annual increase of 3.3% was recorded in Wales, taking average values to £166,000, while in Scotland prices have jumped by 4.8% over the last year to reach £187,000 typically. In Northern Ireland, values have edged up to reach around £132,000.

Property values across England are now 8% higher than their pre-crisis peak, while in Northern Ireland they are still 49.6% below their previous peak.

In Scotland and Wales, prices are 4.7% and 3.5% below the 2008 peaks for these countries respectively.

Campbell Robb, chief executive of charity Shelter, said the latest figures are evidence that " house prices are spinning further out of control".

He continued: "Worryingly, as house prices continue to rise, some will be tempted to overstretch themselves in a frantic bid to get on the property ladder.

"But with interest rates currently at historic lows, it's a real concern that many might find themselves struggling to make ends meet in the future.

"Thousands of people are working hard and saving, now Government must meet them halfway by building the genuinely affordable homes they desperately need."

Toughened mortgage lending rules came into force at the end of April and some studies have shown a slight slowdown in activity since lenders started having to ask mortgage applicants more questions about their spending habits under the Mortgage Market Review (MMR) clampdown.

Analysts have said it is unclear at the moment whether this slowdown is just a temporary impact as lenders adjust to the new rules, or part of a longer-term trend.

Howard Archer, chief European and UK economist for IHS Global Insight, said: "House prices still look more likely than not to see solid increases over the coming month, although there will probably be some easing back from recent peak levels.

"Buyer interest is still relatively elevated, and it is likely to continue to be supported by substantially improved consumer confidence, markedly rising employment, and extended low mortgage interest rates. It is also currently being supported by the Help to Buy initiatives...

"Meanwhile, limited supply of houses is likely to remain a significant factor pushing up prices in many areas."

Housing Minister Kris Hopkins said: "Mortgage lending and loan-to-value ratios on new lending remain below historic averages - in fact, relative to earnings, median house prices across England are around the same level as in 2005.

"But we're determined to get Britain building and help people who work hard and want to get on the property ladder to do so, which is why we've introduced Help to Buy, which helps people buy a home with a fraction of the deposit they would normally require.

"Over the past year over 27,000 people have become home-owners through this scheme - about 4% of all mortgage completions.

"Leading developers are building more as a direct result of the scheme, with housebuilding now at its highest level since 2007 - but we want to go further.

"That's why we're introducing new measures that will help unlock development on enough unused, previously developed brownfield land for up to 200,000 permissions for new homes by 2020."

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