Keep updated with complimentary alerts
Just sign up for the UK house prices myFT Digest — sent straight to your inbox.
In September, UK house prices experienced their most rapid annual increase in two years, fueled by declining mortgage rates that revitalized the property market.
The average property price rose by 3.2 percent year-on-year, up from 2.4 percent in August, marking the quickest growth since November 2022, according to new data from mortgage lender Nationwide.
Reuters’ economists had anticipated a growth rate of 2.7 percent.
On a monthly basis, prices increased by 0.7 percent, exceeding expectations as well. The UK’s average house price now stands at £266,094, approximately 2 percent lower than the peak reached in summer 2022, per Nationwide’s findings.
Robert Gardner, chief economist at Nationwide, stated that income growth has consistently outpaced the increase in house prices recently, while borrowing costs have slightly decreased due to assumptions that the Bank of England may continue to lower interest rates.
“These developments have contributed to an improvement in affordability for potential buyers and supported a modest uptick in both activity and house prices, albeit remaining subdued compared to historical standards,” he remarked.
House prices surged during the pandemic, driven by historically low interest rates. However, the property market subsequently faced a spike in borrowing costs as the BoE aimed to combat inflation.
Currently, the property market is on the mend as lenders have reduced their mortgage rates following the BoE’s quarter-point interest rate decrease to 5 percent in August.
According to new data from the BoE released on Monday, UK mortgage approvals have risen more than anticipated, reaching their highest level since August 2022. Net mortgage approvals rose from a revised 62,500 in July to 64,900 in August.
Additionally, remortgaging approvals increased from 25,200 to 27,200 during the same period, with the quoted 2-year mortgage rate for a 60 percent loan-to-value ratio decreasing to 4.55 percent in August, down from 4.8 percent in July and 5 percent in June.
Stephen Perkins, managing director at mortgage broker Yellow Brick Mortgages, described the UK property market as having gone “supersonic” in September. “Driven by ongoing rate reductions from lenders and robust wage growth, the market is really beginning to accelerate. I suspect that with the autumn Budget approaching, people are motivated to act now, as it has the potential to influence demand,” he added.
Regionally, Northern Ireland saw the fastest annual increase in house prices, rising by 8.6 percent year-on-year in the three months ending September, more than three times the national average of 2.5 percent, according to Nationwide data.
Northern England also outperformed southern England, with a year-on-year price increase of 3.1 percent compared to 1.3 percent in the south.
In London, which has the highest property prices averaging £525,000, growth was under the national average at 2 percent.
Nationwide revealed that terraced houses experienced the highest price increase over the past year at 3.5 percent, while flats saw an increase of 2.8 percent.
Alex Kerr, economist at Capital Economics, anticipates that national house prices will “gradually rise” throughout the remainder of this year but expects a “stronger rebound in price growth next year as mortgage rates continue to decline.”
If the BoE reduces rates to 3 percent in early 2026, “the subsequent drop in mortgage rates should enhance demand, leading to greater momentum in house prices next year,” he asserted.