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House prices surge 3.5% in August

House prices surge 3.5% in August

Category: Mortgages

Updated: 30/08/2013
First Published: 30/08/2013

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House prices in August rose 3.5% when compared to a year ago, according to Nationwide Building Society's latest House Price Index.

The building society's data revealed the average UK home is now worth £170,514 – 0.6% higher than July's figure and up a significant 3.5% on August last year.

Nationwide's chief economist, Robert Gardner, attributed rising prices to returning consumer confidence as well as Government measures aimed at boosting the mortgage and housing markets, such as the Funding for Lending Scheme and Help to Buy.

"An improvement in the availability and a reduction in the cost of credit is also enabling more people to take their first steps into the property market," he said.

Worries of a house price bubble

Recently, however, concerns have been raised that the second part of Help to Buy – which is due to be launched in January - risks creating another house price bubble.

Critics say this is because the scheme could lead to uncontrolled mortgage lending, causing a surge in demand for houses and thus artificially inflating prices.

But in an interview with the Daily Mail, the governor of the Bank of England, Mark Carney, defended Help to Buy, saying he is aware of the "damage" which could be caused, and that the Bank of England would be ready to head off the risks of a housing bubble.

He said, if necessary, the Bank would by able to restrict mortgage credit and even raise the amount of capital that banks and building societies are required to hold in order to restrain mortgage lending.

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