The Average House Price Rises To Over 250 000 | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 03/11/2021

The cost of the average house price in the UK has increased 0.7% month-on-month and now stands at £250,311, figures released in the Nationwide House Price Index reveal.

Over the past year the average house price has increased by 9.9% and the cost of the average house is now £30,728 higher since the pandemic started in March 2020. Commenting on the release of today’s figures, Robert Gardner, chief economist at Nationwide Building Society, said: “Demand for homes has remained strong, despite the expiry of the Stamp Duty holiday at the end of September. Indeed, mortgage applications remained robust at 72,645 in September, more than 10% above the monthly average recorded in 2019. Combined with a lack of homes on the market, this helps to explain why price growth has remained robust.”

Will a base rate rise impact house prices?

Tomorrow the Bank of England is due to announce whether or not it is increasing base rate, with many financial experts predicting a base rate rise. Explaining the impact a base rate rise would have on the housing market, Gardner said: “Providing the economy does not weaken significantly, the impact of a limited rise in interest rates on UK households is likely to be modest. This is partly because only a relatively small proportion of borrowers will be directly impacted by any change.

“Most lending on personal loans and credit cards is on fixed rates or tends to be unaffected by movements in the Bank Rate. Similarly, the vast majority of new mortgages have been extended on fixed interest rates in recent years.

“Indeed, the share of outstanding mortgages on variable interest rates (and which are therefore likely to see an increase in payments if Bank Rate is increased) has fallen to its lowest level on record, at c20%, down from a peak of 70% in 2001 and c60% in 2011.

“Moreover, even a 0.4% increase in rates (to 0.5%) is likely to have a modest impact on most borrowers who are on variable rates. For example, on the average mortgage, an interest rate increase of 0.4% would raise monthly payments by £28 to £625 (equivalent to c£335 extra per year), though a rise of Bank Rate by 0.9% (to 1%) would see typical payments go up by a more substantial £64 to £660 (an extra c£765 per year).”

Should you fix into a fixed rate mortgage deal?

Although mortgage rates have started to rise over the past few weeks there are still highly competitive deals available in both the two and five year fixed mortgage charts. This means that borrowers on their lender’s standard variable rate (SVR) may want to consider switching to a fixed rate deal now, especially as a base rate rise tomorrow may see their mortgage repayments rise in the coming months. Those uncertain of whether switching to a new fixed mortgage deal is right for them should consider speaking to a mortgage broker, who will be able to look at their circumstances and discuss the best options available. Meanwhile, borrowers thinking about switching should visit our mortgage charts to compare the best deals available today.

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