The Nationwide has reported that UK house prices edged up by 0.8% in August, marking the 16th successive monthly price rise. As a result, the annual pace of house price growth is up to 11% from 10.6% in July.
The average price of a home is now £189,306.
Robert Gardner, Nationwide’s chief economist, said: “While this is still below the 11.8% recorded in June, house price growth continues to outpace earnings by a wide margin, with average wage growth running at less than 1% in recent months.
“Nevertheless, at a national level housing affordability does not appear stretched by historic standards, in part due to the low level of mortgage rates. The cost of servicing a typical mortgage remains close to the long run average as a share of take home pay.
“The outlook for the housing market remains highly uncertain. The number of mortgage approvals fell by almost 20% between January and May, suggesting that activity was cooling. However, there was a modest rebound in June and it is unclear how much of the slowdown was due to the introduction of Mortgage Market Review rather than an underlying loss of momentum.
“Surveyors report that new buyer enquiries have moderated somewhat in recent months, and the prospect of interest rate increases together with subdued wage growth may temper demand in the quarters ahead.
“However, the brightening economic outlook is likely to provide ongoing support for housing demand. Consumer sentiment remains buoyant thanks to declining inflation and sustained increases in employment.
“Similarly, the first increase in interest rates still appears some way off – we expect the first increase in the first quarter of 2015. Guidance from the Bank of England suggests that the increase in interest rates is likely to be gradual, and they are expected to settle at a level somewhat below the average prevailing before the financial crisis.
“Moreover, the supply side of the market remains constrained, which will continue to provide underlying support for prices.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “August proved to be a decent month for the housing market, even though it is traditionally a quiet time of year when not much gets done. Prices continued to edge up slightly, while we had one of our best months for new business – emphasising the continued strength of the London property market in particular.
“The hysteria surrounding the hiking of Bank base rate has subsided again, with the economic news since early August dampening down speculation. Although two members of the Monetary Policy Committee called for a rise in rates at the last meeting, the majority of members thought there was insufficient evidence of inflationary pressures to justify an immediate increase in base rate.
“Mortgage rates continue to be attractive with one lender even cutting its five-year fixed rate to below 3% for some borrowers last week. While borrowers may be worried about an interest rate rise, there are plenty of excellent rates still available which will continue to support activity in the market to an extent.”