House prices jumped by 1.3% in August according to a report by Nationwide, which is the largest monthly increase in over two and a half years.
It is said that the large rise in house prices is being delivered mainly by manipulating the statistics. The seasonal fluctuations are helping to contribute to the more realistic and less dramatic rise in prices. Without the manipulated figures house prices have only risen by 0.2 of a per cent.
The seasonal adjustments to the housing market figures are put in place to give quieter off season months a better comparison against the peak months.
Nationwide, which is the UK’s largest building society has also highlighted the fact that a lot of first time house buyers are still being left out in the cold while trying to get onto the property ladder because of the large deposits being demanded for them to get a mortgage.
The housing market has been battered in recent times, largely because of the financial crisis which banks fear will deepen even more, the poor economy as a whole and the ending of the first time buyer stamp duty holiday, which ended in March. The housing market has proved to be more resilient than many have predicted.
Robert Gardner, Nationwide’s Chief Economist, said: “The fact that the annual pace of house price decline moderated to -0.7% in August from -2.6% the previous month provides evidence that conditions remain fairly stable.
‘This may be explained by the surprising resilience evident in the UK labour market, with further increases in employment in recent months, even though the UK economy has remained in recession.’
‘Interestingly, the share of mortgages taken up by first time buyers has actually increased slightly to 39% of the total, up from the 37% prevailing in the pre-crisis period.’
He added: ‘Perhaps the most dramatic change is in the level of activity. For example, the average number of mortgage approvals is currently running at around 50,000 per month, around half the level prevailing over the 2005-2007 period.’
Commenting on the issues faced by first time buyers trying to get a mortgage he said: ‘Although it is more expensive for lenders to lend at 95%, lending to those with a 5% deposit hasn’t suddenly become high risk overnight and there should be more products available in this area. ‘
‘If all lenders take steps to serve this market more proactively it would not only help more tenants to buy, it would also enable the market to get going again from the bottom and help the housing market on its slow climb back to a degree of normality. That would benefit lenders too.’