The latest Halifax house price index showed property values in the three months to August were 5.4% up on the same period last year, this was the biggest annual jump since June 2010.
Looking across the year, house prices have risen every month since the start of the year, taking seasonal factors into account. The average UK house price now stands at £170,231.
Halifax’s housing economist Martin Ellis said government schemes had forced up demand for housing and prices were likely to continue rising.
“Economic improvement and low interest rates, supported by official schemes such as Funding for Lending and Help to Buy, appear to have boosted housing demand in recent months,” he said. “Overall, house prices are expected to rise gradually over the remainder of the year.”
Mortgage approvals have also risen in line with house sales. Halifax said 60,600 mortgages were approved in July, a rise of 4% on June’s figures. This was the first time total approvals had passed the 60,000 mark since 2008.
“House prices in the three months to August were 2.1% higher than in the previous three months; unchanged from both June and July,” Ellis added.
“Prices in the three months to August were 5.4% higher than in the same three months last year, the highest annual rate since June 2010.
“Housing market activity is also on an upward trend with the number of mortgage approvals for house purchases – a leading indicator of completed house sales – 10% higher in the three months to July compared with the previous quarter after allowing for seasonal influences.”
Dr Howard Archer, chief european and UK economist at Europe & CIS Economies, said: “While an improving housing market is helpful to growth prospects, it is vitally important for stability and longer-term growth prospects that a new housing price bubble does not emerge.
“The Bank of England has indicated that it will keep a close eye out for any house price bubble developing and has various tools apart from interest rate hikes to deal this such as raising capital requirements on banks and building societies’ mortgage lending
“Policymakers should seriously consider limiting or even pulling the plug on the Help to Buy mortgage guarantee scheme at the first sign of any housing price bubble developing. The Bank of England has also indicated that it will keep a close eye out for any house price bubble developing and has other tools apart from interest rate hikes to deal this such as raising capital requirements on banks and building societies’ mortgage lending.”