It means that the average price of house is now £183,577, some 10.9% higher than a year ago, according to the latest index from the Nationwide Building Society.
But it shows but the upturn in the housing market is not even with London and the South East seeing significantly stronger growth than other parts of the country.
And Robert Gardner, Nationwide's chief economist, warned that new lending rules introduced under the Mortgage Market Review (MMR) could have an impact on activity levels in the months ahead as the new measures bed down.
Indeed, the latest figures from the Bank of England published today show that mortgage lending in the UK fell in March, down to 67,135 from 69,592 in February. The February figure was itself lower than January's.
Mortgage approvals have now fallen by 11.9% in the past two months and the figures are the lowest since October 2013. Some experts believe that anticipation of the new MMR rules which mean lenders have to ask applicants about their outgoings as well as their income could be the reason.
‘It is likely that the further easing back in mortgage activity in March from January's peak level reflected some banks raising their mortgage lending standards before the new regulations,’ said Howard Archer, the chief UK economist at IHS Global Insight.
Gardner believes things will settle down. ‘Underlying demand is likely to remain robust, as mortgage rates remain close to all time lows and as consumer confidence improves further on the back of stronger labour market conditions and the brighter economic outlook,’ he said.
‘Earnings growth is beginning to pick up, with wage increases finally outpacing the rise in the cost of living in February. Nevertheless, house price growth is outstripping income growth by a wide margin. The risk is that unless supply accelerates significantly, affordability will become stretched,’ he explained.
‘The upturn in construction of new homes continues to lag far behind the upturn in demand, with the number of new homes being built in England still around 40% below pre-crisis levels and this was already insufficient to keep up with the increase in the number of households being formed. MMR measures, which place a greater emphasis on affordability, should help to ensure that prices do not become detached from earnings,’ he added.
The Nationwide index gives an insight into the north/south divide in the UK market. In the first quarter of 2014, prices in the capital were around 20% higher than their pre-crisis levels, while in the UK as a whole prices were still around 2% lower.
‘Interestingly, price growth in London and the South East appears to be being driven by the top end of the market, with higher priced locations recording stronger price growth. This pattern accords with housing transactions data, which shows that higher priced properties in London and the South East have accounted for a higher proportion of transactions,’ said Gardner.
For example, in London the proportion of housing transactions involving properties over £500,000 has increased from 13% in 2007 to around 25% in 2013. The share involving properties of over £1 million has more than doubled from 3% to more than 6%.
Others agree that MMR could put a damper on the market while everyone adjusts to the new measures.‘The new MMR regulations will restrict the amount of money that many people will be able to borrow when taking out a new mortgage,’ said Neil Andrews, managing director of independent finance brokers KIS bridging.
