UK house prices rise again in August despite lending clampdown
British house prices rose in August for the 16th month in a row, defying attempts by regulators to cool down the market with a clampdown on irresponsible mortgage lending.
Prices increased by 0.8% in August against 0.2% in July, resulting in the annual pace of house price growth lifting to 11% from 10.6% in July, according to the monthly House Price Index from building society Nationwide.
Average house prices rose to £189,306 in August from £188,949 in July.
The figures come after the Mortgage Market Review (MMR) in April, which obliged lenders to take more account of borrowers' ability to repay loans, and moves by the Bank of England to cap the number of loans worth more than four times a borrower's income.
Nationwide's chief economist Robert Gardner said house price growth continued to outpace earnings by a wide margin, with average wage growth running at less than 1% in recent months.
Policymakers are worried that a continued surge in house prices could overstretch buyers and lead to another house price crash, particularly if interest rates rise later this year or early next year.
Gardner said the market outlook remained highly uncertain, with the number of mortgage approvals falling almost 20% between January and May, suggesting that activity was cooling, but rebounding modestly in June.
"It is unclear how much of the slowdown was due to the introduction of MMR rather than an underlying loss of momentum," Gardner said.
"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."
Alex Gosling, managing director of online estate agent Housesimple.co.uk, said: "With average house prices close to £190,000, talk of the housing market running out of steam appears to have been a little premature.
"However, take August figures with a pinch of salt because activity tends to drop off, with large swathes of the country on their summer holidays.
"September should give us a better guide as to the sentiment in the market. Don't be surprised to see prices ease next month."
PW