House prices show biggest monthly rise in almost three years

House prices grew at the fastest pace for almost three years last month, despite higher borrowing costs.
The average house price increased by 1.2 per cent month-on-month in November, the largest monthly gain since March 2022, figures from the mortgage lender Nationwide showed.
Year-on-year prices rose 3.7 per cent, up from 2.4 per cent in October and the fastest rate of annual growth for two years.
Across the UK, the average price of a home in November was £268,144. Prices are now just 1 per cent below the all-time high recorded in the summer of 2022, according to Nationwide’s measure.
Robert Gardner, Nationwide’s chief economist, said: “The acceleration in house price growth is surprising, since affordability remains stretched by historic standards, with house prices still high relative to average incomes and interest rates well above pre-Covid levels.
“The pick-up in price growth is unlikely to have been driven by upcoming stamp duty changes, since the majority of mortgage applications commenced before the budget announcement.”
A report last week from Rightmove, the property website, showed that first-time buyers in the most expensive areas of the country were rushing to complete property purchases before stamp duty costs rise by an average of £6,300 in the spring.
From April 1, stamp duty must be paid from an earlier starting point for first-time buyers, beginning from a property price of £300,000 rather than its current level of £425,000. Zoopla, the property search website, estimates that the proportion of first-time buyers having to pay stamp duty from next April is likely to double to 40 per cent.
Nationwide expects the changes to stamp duty to result in a rise in property transactions in the first three months of next year and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes.
It said housing market activity had remained relatively resilient in recent months, with mortgage approvals approaching pre-pandemic levels, despite the rise in mortgage rates.
Nationwide said debt levels were at their lowest level relative to household income since the mid-2000s. Wage rises continue to outstrip inflation and unemployment is low, helping underpin a rise in both house prices and housing market activity since the start of the year.
The Bank of England said last month that interest rates would fall by less than expected next year because of the inflationary impact of the budget, which included an extra £70 billion of spending next year.
The comment was made after the Bank cut interest rates for the second time this year by 0.25 percentage points to 4.75 per cent. The Bank of England raised interest rates to a 15-year high of 5.25 per cent in August 2023 and only started to cut them in August.
Ruth Gregory, deputy chief UK economist at Capital Economics, said: “November’s surprisingly large rise in the Nationwide house price index suggests the housing market is picking up momentum despite recent rises in mortgage rates.
“We doubt this [level of] strength will be sustained, but the housing market’s resilience supports our forecast that house prices will rise by an above-consensus 3.5 per cent next year.”