House prices up at fastest rate for three years

Property prices continued to climb throughout September, with the annual growth rate now at 5% across the country (see our 50 House Buying Tips guide).

For the first time since 2007, all 13 UK regions have seen increases, with the typical UK home now worth £172,127, compared to £170,514 a month ago.

But the gap between average house prices in the north and south of England has widened to over £100,000 for the first time, Nationwide says.

London continued to show the biggest increases in house prices, with a 10% year-on-year increase and a record average price of £331,338. Manchester has also seen a 10% pick-up in house prices.

Northern Ireland saw its first annual price rise (0.9%) since 2007, although average house prices remain the lowest out of all UK regions at just £108,671.

But some individual cities are not seeing rises, with Carlisle and Southampton recording falls of 3% and 2% respectively.

Nationwide's chief economist, Robert Gardner, says more houses need to be built if the current level of demand is to be met: "The risk is that if demand continues to run ahead of supply, affordability may become stretched.

"House price growth has been outstripping average earnings growth since the middle of the year, for the first time since late 2010."

Fears of house price 'bubble'

Meanwhile, chancellor George Osborne is to give the Bank of England greater powers to prevent the Government's Help To Buy scheme from causing an unsustainable property boom.

The first stage of Help to Buy, which was launched in April, offers interest-free loans of up to £120,000 to give people in England the chance to buy a new-build home with a deposit of just 5%.

The plan, which sees the Government guarantee mortgages of up to £600,000, will be rolled out to all homes in January. (See the Government reveals more Help to Buy details MSE News story.)

But now the Bank will monitor the scheme each year, and may suggest reductions to the £600,000 limit if necessary. Originally, it was meant to assess the scheme every three years.

It can also recommend to the Treasury that it makes loans more expensive by increasing the fees charged to lenders for the guarantees.

A Treasury spokesman says: "We must remain vigilant as the recovery progresses."