UK house price growth is at a 17-year high

According to the mortgage lender, annual rise in house prices reached 14.3 percent in February, the fastest rate since November 2004. The cost of a typical UK home has hit a new record high of £265,312, up £33,000 in the last year, according to the report. Prices are being driven higher by strong demand, limited supply, and a healthy labor market, according to the report.

Nationwide, one of the largest mortgage lenders in the UK, stated that the property market had “a surprising amount of momentum considering the increased pressure on household budgets and the continuous rise in borrowing costs.” Households in the United Kingdom are being squeezed by a cost-of-living crisis, with prices growing at the quickest rate in 30 years due to increases in fuel, electricity, and food expenses.

Mortgage rates are also rising as a result of the Bank of England raising interest rates three times in four months to try to slow price inflation. However, according to Nationwide, these factors have not slowed the pace of house price increase. House prices are now more than a fifth higher than they were in early 2020, when the epidemic struck. Wales, south-west England, and East Anglia saw the greatest rates of increase, while London experienced the slowest, at 7%. “A combination of strong demand and a restricted supply of available houses on the market has kept prices on the rise,” said Robert Gardner, Nationwide’s senior economist.

The UK labor market is solid – job openings reached a record high in October last year – and unemployment has continued to decline, which may have aided the home market, according to him. Furthermore, some people “significantly saved” during lockdowns, which “certainly helped potential homeowners obtain a deposit.” Despite these considerations, Nationwide predicts that home price growth will decrease in the coming year due to rising inflation and interest rate increases.

In October of last year, the Office for Budget Responsibility (OBR), an independent organization that prepares economic predictions for the government, anticipated that home prices will decline in 2022. “For starters, mortgage rates appear to be on the increase in the next months,” she added. “In addition, we expect a substantial decline in households’ real disposable earnings to have a negative impact on home demand.”