The index shows the average house price is now £173,678 which is around 7% below the 2007 peak.
Commenting on the figures, Robert Gardner, Nationwide's chief economist, said: “The UK housing market appears to be following the more resilient upward trend evident in the wider economy in recent quarters. After averaging less than 1% in the first half of the year, the annual pace of house price growth accelerated to 5.8% in October from 5% the previous month.
“The ability and willingness of potential buyers to transact has been steadily increasing. The ability to buy has been supported by continued gains in employment and policy measures such as the Help to Buy and Funding for Lending schemes which have improved the availability and lowered the cost of credit. Mortgage rates are close to all time lows.
“The willingness of potential buyers to step into the market has also been increasing. While employment has been rising steadily for some time, it is only in the last few quarters that consumer sentiment has improved markedly. This may in part be the result of the improved performance of the wider economy. The UK economy expanded at a healthy 0.8% q/q pace in Q3 - the third consecutive increase and the fastest pace of growth for three years.
“Nevertheless, while house price growth has picked up, at a national level prices remain around 7% below their 2007 peak. Moreover, typical mortgage servicing costs remain modest by historic standards thanks to the ultra-low level of interest rates. A typical mortgage payment for a first-time buyer is currently equal to around 29% of take home pay, in line with the long term average.”
Andy Knee, chief executive of LMS, said: “Increased levels of competition in the property market are continuing to push house prices up further, with the average price currently sitting at 5.8% higher than this time last year. High rents and low returns on savings are continuing to draw people’s attention towards property, not only as somewhere to live but also as a means on investment.
“However, it is important to recognise the pressure that this increased demand is putting on the country’s limited supply of houses.”
Jeremy Duncombe, director of Legal & General Mortgage Club, agrees. Commenting he said: “The latest figures on house prices from Nationwide will continue to encourage speculation that prices are rising too quickly.
“Whilst it’s true that house price growth that significantly outpaces inflation is not good news if it persists over many months, it’s worth remembering how recently growth started and the position of the market only a few months ago. We also have to look at the wider regional picture where growth is much less striking. The momentum created by the various stimulus schemes should not be wished away too quickly.
“The main long term problem that the UK faces is the chronic lack of suitable housing. This constrained supply is the main issue to solve if we are to ensure a stable, balanced and sustainable UK housing market in the future.”
