UK house prices see strong rise, says Nationwide

BBC NEWS,

Prices of houses and flats have picked up strongly, according to figures from the UK's second largest mortgage lender.

The Nationwide building society said house prices are now rising at 6.5% a year, up from 5.8% a month ago.

It said the average price of a house or flat in the UK is £174,566, the highest since April 2008.

However, other measures suggest house price inflation is lower than the Nationwide figure.

The Nationwide made it clear that prices are still below the peak of the market, seen six years ago.

"Prices are still around 6% below the all-time high recorded in late 2007," said Robert Gardner, Nationwide's chief economist.

He said the improvement was the result of the better outlook in the jobs market, and "a brighter economic outlook, which has helped to bolster sentiment".

On a monthly basis, prices increased by 0.6%, slightly slower than in October, when prices rose by 1% in one month alone.

Mortgage costs

Other recent housing market surveys have recorded growth rates around half that of the Nationwide.

The Land Registry said this week that prices in England and Wales were rising by 3.4% year on year. Land Registry figures are based on actual sales, instead of mortgage approvals, which are used by Nationwide.

However, the Land Registry estimates include a significant time lag.

The Office for National Statistics (ONS) said its latest estimate for house price inflation was 3.8%.

Some economists believe the Bank of England's decision to stop Funding for Lending (FLS) for household mortgages could now put a brake on the housing market.

From January, FLS will only be used for business lending.

Under FLS, banks and building societies have been able to borrow money cheaply, if they lend it out to individuals and businesses.

One of the reasons given for its withdrawal from individuals was that the supply of mortgages had improved and FLS help was no longer needed.

But if the decision to restrict FLS does put upward pressure on mortgage rates in the new year, that, in turn, could slow house price inflation.