The Nationwide Building Society has reported that UK house prices increased by 0.6% in October, with the annual pace of price growth edging up to 3.9% from 3.8% in September.
The average price of a home in the UK is now £196,807.
Robert Gardner, Nationwide’s chief economist, said: “Over the past five months annual price growth has remained in a fairly narrow range between 3% and 4%, broadly consistent with earnings growth over the longer term. While this bodes well for a sustainable increase in housing market activity, much will depend on whether building activity can keep pace with increasing demand.
“Fixed rate mortgages have remained the most popular product type by a considerable margin in recent years. Data from the Council of Mortgage Lenders suggests that almost 90% of new mortgages were contracted on fixed rates over the past twelve months. This is probably a reflection of ongoing uncertainty about the precise timing of UK interest rate increases as well as a desire to lock in low interest rates.
“The proportion of new mortgage lending contracted on fixed rates has been steadily increasing since the low point in 2010, when less than half of lending was on fixed rates. In recent months the proportion of lending accounted for by fixed rate deals has surpassed the levels prevailing before the financial crisis.
“Fixed rate deals are most popular amongst first time buyers for whom certainty over monthly payments is likely to be particularly important. Indeed, over the past twelve months 95% of new mortgage lending to first time buyers was on fixed rates.”
Mark Dyason, director of UK independent mortgage broker Edinburgh Mortgage Advice, added: “Fixed rates mortgages, especially five-year fixes, are by a distance the most popular with borrowers right now. Any rate rise talk from the Bank of England travels like wildfire through the ranks of homeowners and prospective homeowners.
“Borrowers know higher rates are coming sooner or later and they are battening down the hatches in advance.
“First time buyers and people with smaller deposits are especially likely to select a fixed rate because that’s what most lenders are offering at high loan to values. With the interest rate upcycle surely getting closer, more borrowers on fixed rates cannot be a bad thing.”