'Pick up' in house prices recorded in sign of market confidence, says Nationwide

House prices have recorded their strongest year-on-year growth in 18 months, in further signs that the market is gathering momentum, Nationwide has reported.

Prices edged up by 0.4 per cent month-on-month in May to reach £167,912 on average, the building society said.

House prices are now 1.1 per cent higher than they were a year ago - marking the fastest annual increase seen since November 2011.

The study is the latest in a string of reports which have pointed to returning confidence in the housing market in 2013 as borrowers find it easier to access a mortgage.

The number of mortgages on the market has increased sharply since the Government launched a scheme called Funding for Lending last August, which has given lenders access to cheap finance to help borrowers.

Lenders have been slashing their rates and they have also reported increased numbers of first-time buyers entering the market.

Government schemes called NewBuy and Help to Buy have also been introduced to specifically give people with smaller deposits a helping hand.

Robert Gardner, Nationwide's chief economist, said: “A number of factors are likely to be contributing to the pick up in activity.

”There has been an improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures, such as the Funding for Lending Scheme.

“Indeed, mortgage rates have fallen back towards all time lows in recent months.

”With the UK returning to growth in the first quarter of 2013, the improvement in wider economic conditions may also be playing a role in boosting sentiment.“

Mr Gardner said the ongoing low interest rates combined with Government policy provided reasons for ”optimism“ that activity would continue to gather pace in the coming months.

But he cautioned that progress was likely to be gradual, with a continued tough jobs market and pressure on household budgets.

”In real terms, average weekly wages have been falling for some time and are now back at the level prevailing in late 2003,“ he said.

Separate Land Registry sales figures for England and Wales released today showed that house prices rose by 0.4 per cent  month-on-month in April to reach £161,458 on average, making them 0.7 per cent higher than a year ago.

Prices in London, which has had strong demand from overseas buyers, were 6.2% higher year-on-year, at £375,795 typically.

By contrast, house prices in the North East saw an annual 5.7% fall, taking them to £95,546 typically.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (RICS), said the figures show the "yawning gap" between London and the rest of the country.

He said: "The latest RICS survey suggests that the success of the Funding for Lending Scheme is bringing more tangible benefits to the market away from the capital and this reflected in the expectations that prices will begin to edge upwards in all the regions, with the exception of Northern Ireland, over the coming year.

"Buyer appetite has responded to the greater availability and accessibility of mortgage finance and the early indications are that the Help to Buy scheme is further boosting sentiment."

PA