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Fifth month rise for house prices, what does this mean for mortgages?

Figures from the Nationwide’s monthly house price index shows that house prices have risen for the fifth month in a row, making the average house price £160,159 – the same level as it was twelve months ago in 2008.

In the third quarter of 2009, the UK’s house prices rose by 3.7 percent in total. The strongest increase for England was in the South West rising by 4.9 percent, whereas the strongest rise for the UK as a whole was seen in Northern Ireland with 9.7 percent. On an annual basis, compared to last year Scotland came out on top as the strongest performing region of the UK.

This fifth consecutive increase continues the trend for small increases we reported earlier this year and tentatively predicted would continue.

Comments in the media from the chief economist at Nationwide, Martin Gahbauer, state that although the annual rates of change are still negative, all regions saw an increase quarter on quarter this year.

For the mortgages market, the result of this remains unclear and experts debate upon how quickly the mortgage market will be stimulated. Reports show that mortgage lending actually decreased by UK banks in the third quarter of this year, and the banks are under pressure from all sides to increase this.

Indeed, Mr Gahbauer stated new buyer interest has certainly increased over the last few months yet the supply of properties available to purchase remains limited, and it is likely to be this supporting the house prices.

Moving forwards, it is likely these small increases may continue and could be maintained for the next few months. The issue, as many agree, is the lack of mortgage lending by the banks.

However, in just the last two weeks, we have seen the return of the 90 percent mortgage for new house purchases offered by HSBC. If this stimulates competition, we hope to see the return of the 90 percent mortgage for borrowers seeking remortgages and a subsequent increase in mortgage lending, albeit with stricter controls upon proof of income and credit checks required for borrowers as mortgagors remain risk averse.

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