UK house prices accelerate at fastest pace since before financial crisis

UK house prices have accelerated at their fastest pace since before the financial crisis, shooting up over 10 per cent over the last year, reveal fresh figures released today.

The cost of buying a home in Britain hit £254,822 this month, the highest price on record and up around £24,000 since December last year, according to building society Nationwide.

House prices have taken off this year driven by a combination of a relief on taxes paid on property sales, prospective homeowners rushing to snap up larger homes with access to green space and a record low interest rate environment.

Chancellor Rishi Sunak raised the threshold at which stamp duty is paid on property sales to £500,000 in July last year.

The tax break was watered down to £250,000 up until the end of September this year. It reverted to its normal £125,000 level at the end of the month.

However, demand in the property market has remained strong despite the relief being pulled.

Robert Gardner, Nationwide’s Chief Economist, said: “Demand has remained strong in recent months, despite the end of the stamp duty holiday at the end of September.”

“Mortgage approvals for house purchase have continued to run above pre-pandemic levels, despite the surge in activity seen earlier in the year,” he added.

The pandemic triggered mass take up of remote working practices, severing workers’ ties to physical offices, igniting strong demand for homes outside cities in the process.

Research published today by bank Halifax found that house prices in towns such as Taunton and Newark have risen more than treble the national average.

However, Nationwide warned the property market is likely to cool in the coming year.

“It appears likely that the housing market will slow next year, since the stamp duty holiday encouraged many to bring forward their house purchase in order to avoid additional tax,” Gardener added.

“The Omicron variant could reinforce the slowdown if it leads to a weaker labour market.”

There are also concerns soaring home prices has choked affordability in the market, causing buyers to take on high levels of debt to fund purchases.

Habito, an online lender, is launching mortgages that are up to seven times a person’s salary, the first time the mortgage to salary multiple has reached this level since Northern Rock was nationalised in 2008.

Higher interest rates will likely deter prospective buyers with lower deposits from pushing ahead with home purchases.

The Bank of England this month hiked rates for the first time in over three years, lifting them 15 basis points from a record low 0.1 per cent.