Nationwide figures show 'relative stability' in annual rate of price change while mortgage approvals remain low

House prices in the UK jumped by 0.6% in October, more than offsetting the previous month's 0.4% fall and bringing the average cost of a property to £164,153, according to Nationwide building society.

The lender's monthly house price index showed prices were down 0.9% year-on-year, but the three-month figure moved into positive territory for the first time since January and showed a 0.5% rise.

Nationwide's chief economist, Robert Gardner, said while monthly figures had failed to show any strong trend, with three months of rises and three months of falls since May, the annual rate of change showed "a picture of relative stability".

However, Gardner said that while the UK had exited recession this month, continued problems in the eurozone and the US would hold back exports, meaning a sudden rise in house prices was unlikely.

"Although the UK economy has been adding jobs in recent quarters, even in the midst of recession, conditions remain very difficult for households," he said.

"Wage growth is still not keeping up with the cost of living and unemployment is still well above normal levels. This helps to explain why housing market activity has remained subdued, with the number of mortgage approvals still running at little more than half their long-run average."

Nationwide's figures are based on mortgages it has approved over the month. Borrowing remains sluggish, despite the government's efforts to boost the number of loans available by offering banks and building societies cheap funds through the Funding for Lending scheme.

Figures from the Bank of England show a total of 50,024 house purchase loans were approved in September, compared to a long-term average of more than 80,000 a month.

Howard Archer, chief economist at IHS Global Insight, had been predicting a 3% fall in house prices over the course of 2012. Following Nationwide's latest figures, however, he said: "The chances are rising that house prices will essentially stabilise over the coming months, although the risks are still slanted to the downside and any significant turnaround in house prices still looks some way off."

Property buying agent Gabby Adler said: "The autumn market has been slower than expected with fewer new properties coming up for sale, so transactions remain at low levels. Prices remain fairly flat and bumping along, as they have throughout the year."

Mark Harris, chief executive of mortgage broker SPF Private Clients, added: "Increased loan availability, better rates as a result of Funding for Lending and increased confidence among buyers as we emerge from the double-dip recession all have a part to play in contributing to a slightly more positive picture for the housing and mortgage markets. What is still required is cheaper mortgages at higher loan-to-values."

Hilary Osborne © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds



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