Nationwide: April house prices spring ahead
Britons simply will not stop buying houses it seems, with figures from April showing house price growth accelerated again.
According to Nationwide this month annual house price growth increased to 10.2 per cent with the monthly rise almost doubling compared with last month to 0.9 per cent.
The average house is now worth £180,314 - some £16,741 higher than at this time last year.
But despite strong rises, and the prospect of interest rate hikes to come, Nationwide is not predicting a house price crash.
"The underlying trend is softening and the return to double-digit annual growth largely reflects a weak period this time last year," said Nationwide chief economist Fionnuala Earley.
Latest three-month growth figures from Nationwide show house prices rose just two per cent between February and April - the lowest three-monthly growth rate since August.
Nationwide also rejects predictions of a likely house price crash.
"Some commentators are already suggesting that the market is poised for a fall with affordability so stretched, especially for first-time buyers," Ms Earley said.
"At a simplistic level, a move in the house price to earnings ratio back to its long term average would imply a fall in house prices of nearly 40 per cent.
"However, the long term average house price to earnings ratio is not a good benchmark given that we would expect this ratio to trend upwards over time."
She pointed out the fall in interest rates since the 1980s and a change in people's preferences towards housing as an investment, mean the "neutral" level of house prices has risen in the last 25 years.
The UK is not building enough homes to meet housing demands and mortgage payments as a proportion of take-home pay suggest interest rates could rise by over two per cent before affordability becomes as stretched as in the late 1980s.
Additionally, the state of the general economy is far better now than in the past.
"Back in the 1980s the collapse in prices came about following a sharp rise in interest rates (from 7.4 per cent in mid-1988 to around 15 per cent two years later) and a 1.4 million increase in unemployment at a time when the economy was slowing," Ms Early explained.
"Today the economy is continuing to grow; the labour market has been remarkably strong and interest rates have increased by only 0.75 per cent in the last two years."
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