UK house prices rise at fastest pace in three years in October - Nationwide

LONDON Thu Oct 31, 2013 7:05am GMT

A sign is seen outside newly built houses in Aylesbury, southern England August 13, 2013. REUTERS/Eddie Keogh

A sign is seen outside newly built houses in Aylesbury, southern England August 13, 2013.

Credit: Reuters/Eddie Keogh

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LONDON (Reuters) - British house prices rose at their fastest annual pace in more than three years this month, helped by government schemes to boost lending and a brighter economic outlook, data from mortgage lender Nationwide showed on Thursday.

Earlier this week Bank of England Governor Mark Carney said higher house prices were one of the main factors driving Britain's economic recovery, and played down concerns that the rapid increase risked turning into a bubble.

Nationwide said house prices in October were 5.8 percent higher than a year earlier, compared to a 5.0 percent rise the month before. This was the biggest annual jump since July 2010 and above economists' forecasts of a 5.1 percent rise.

Prices in the three months to October rose at the fastest rate since the end of 2009, when there was a brief rebound from price falls of around 20 percent due to the financial crisis.

"The ability to buy has been supported by continued gains in employment and policy measures ... which have improved the availability and lowered the cost of credit," said Nationwide's chief economist Robert Gardner.

At the start of October, Britain's government expanded its Help to Buy scheme to make it easier for home-buyers to get a mortgage for more than 80 percent of the value of a property.

The government hopes the scheme will spur the construction of new homes, but many economists expect its main impact will be to push up house prices further.

Analysts at UBS Wealth Management forecast on Wednesday that prices would rise 10 percent next year, which they said could add 0.9 percent to gross domestic product over time, mostly due to wealth effects boosting consumer morale.

However, Nationwide warned that the affordability of housing would become stretched without further construction.

For now price rises are concentrated in London and surrounding regions, and the Bank of England has played down suggestions that a price bubble may be building.

House prices are around 7 percent below the peak reached in late 2007, Nationwide said.

(Reporting by David Milliken; Editing by Hugh Lawson)

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