Adverse Mortgages UK

House prices rose on average 6.6 per cent in the last 12 months or by just under £30 a day, according to new data.

The Nationwide house price survey for August shows the average home is now worth £167,721 – up 0.8 per cent last month alone.

Fionnuala Earley, Nationwide's group economist, said: "The annual rate of house price inflation picked up for the third consecutive month in August. This is the fastest annual rate of growth since April 2005 and almost three times faster than at this time last year."

However, Ms Earley went on to explain that she expected the market to slow over autumn. However, falls in house price inflation recorded the last time the Bank of England raised rates – from 20 per cent to 2.3 per cent from November 2003 to August 2004 – are not expected to be repeated.

The economist said: "Even though we expect rates to increase to five per cent - 25 basis points above the peak of the last cycle - current economic conditions, especially in the labour market, are still supportive.

"This means that rate rises are likely to only be a catalyst to the slowing we had already expected, rather than fostering a repeat of the 2004 slowdown."

Ms Earley added that the effect of interest rates hitting five per cent would be an extra £37 on the average monthly mortgage bill compared with before August.

© Adfero Ltd

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