House prices rose at their fastest annual rate in two years in November as the housing market continued to display surprising strength.
New figures from Nationwide show that house prices rose by 3.7 per cent year-on-year last month, up from 2.4 per cent the month before.
This means that house prices are just one per cent below their all-time high recorded in the summer of 2022.
In the month of November alone, house prices rose 1.2 per cent, the largest monthly increase since March 2022.
Robert Gardner, Nationwide’s chief economist, said: “The acceleration in house price growth is surprising, since affordability remains stretched by historic standards, with house prices still high relative to average incomes and interest rates well above pre-Covid levels.”
Even though the Bank of England has cut interest rates twice this year, the benchmark Bank Rate still stands at 4.75 per cent.
Markets now anticipate a slower pace of rate cuts next year due to stubborn price pressures and the added fiscal stimulus from October’s Budget.
Changes to stamp duty, announced in the Budget, may provide a short term boost to the market as buyers look to avoid a tax rise, but this will likely fade later in 2025.
Still, Gardner expected that the housing market would continue to perform well. Figures out last week showed that the number of mortgage approvals rose to the highest level since August 2022 in October, suggesting demand remains strong.
The labour market has also remained solid, which has supported strong income gains to offset higher prices.
“Providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth,” he said.