Average price of British house surpasses 250,000 pounds, in first

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12 March 2021, United Kingdom, Ashford: Policemen investigate outside a house in Freemens Way following the discovery of human remains in an area of woodland in Ashford during the hunt for missing woman Sarah Everard. The Metropolitan Police announced on Wednesday that a diplomatic protection officer held over the disappearance of Sarah Everard has been arrested on suspicion of murder. Photo: Gareth Fuller/PA Wire/dpa
12 March 2021, United Kingdom, Ashford: Policemen investigate outside a house in Freemens Way following the discovery of human remains in an area of woodland in Ashford during the hunt for missing woman Sarah Everard. The Metropolitan Police announced on Wednesday that a diplomatic protection officer held over the disappearance of Sarah Everard has been arrested on suspicion of murder. Photo: Gareth Fuller/PA Wire/dpa

The price of a typical British home has topped a quarter of million pounds for the first time, according to an index.

The average house price in October was 250,311 pounds (341,290 dollars), marking a 9.9-per-cent annual increase and a 0.7-per-cent month-on-month uplift, Nationwide Building Society said.

Robert Gardner, Nationwide’s chief economist, said: “The price of a typical UK home has now passed the 250,000-pound mark, an increase of 30,728 pounds since the pandemic struck in March 2020.”

Gardner said demand for homes has remained strong, despite the expiry of the stamp duty holiday at the end of September.

He continued: “Indeed, mortgage applications remained robust at 72,645 in September, more than 10 per cent above the monthly average recorded in 2019. Combined with a lack of homes on the market, this helps to explain why price growth has remained robust.

“The outlook remains extremely uncertain. If the labour market remains resilient, conditions may stay fairly buoyant in the coming months – especially as the market continues to have momentum and there is scope for ongoing shifts in housing preferences as a result of the pandemic to continue to support activity.

“However, a number of factors suggest the pace of activity may slow. It is still unclear how the wider economy will respond to the withdrawal of government support measures.

“Consumer confidence has weakened in recent months, partly as a result of a sharp increase in the cost of living.”

Gardner said there has been increased speculation that the Bank of England will increase interest rates in the coming months.

He said: “Investors expect bank rate to be increased from its current record low of 0.1 per cent before the end of the year – most likely to 0.25 per cent or 0.5 per cent – and perhaps reaching 1 per cent within a year, though markets project they will remain close to that level in five years’ time.

“Providing the economy does not weaken significantly, the impact of a limited rise in interest rates on UK households is likely to be modest. This is partly because only a relatively small proportion of borrowers will be directly impacted by any change.

“Most lending on personal loans and credit cards is on fixed rates or tends to be unaffected by movements in the bank rate. Similarly, the vast majority of new mortgages have been extended on fixed interest rates in recent years.”

He said a 0.4-percentage-point increase in rates to 0.5 per cent “is likely to have a modest impact on most borrowers who are on variable rates.”

“For example, on the average mortgage, an interest rate increase of 0.4 per cent would raise monthly payments by 28 to 625 pounds (or around 335 extra pounds per year), though a rise of bank rate to 1 per cent would see typical payments go up by a more substantial 64 to 660 pounds (more than 760 pounds per year approximately).”

He added: “It’s important to note that a small proportion of households already have a relatively high debt service burden.

“For example, English Housing Survey data showed that in 2019 around 10 per cent of homeowners spent more than 30 per cent of their gross income on their mortgage each month.

“For those households, some of whom will be on variable rates, any rate rise will be a struggle, especially given the broader increase in the cost of living, even though the impact on the wider economy and most households is likely to be modest.”

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