Although house prices rose by 0.2 per cent in February compared with January, the levels are exactly the same as a year ago, according to data from Nationwide Building Society.
The average cost of a house is now £162,638 but Nationwide said that it has seen “tentative signs of a pick-up” in recent months following the launch of the Government’s Funding for Lending Scheme (FLS), which has helped to increase the supply and affordability of mortgages. In fact, the number of mortgages on the market has increased by around one third since it was introduced.
The FLS is a scheme run by the Bank of England, which, since last August, has been offering cheap funds to banks and building societies on condition they then lend the money to personal and business customers.
Recent evidence shows that the personal uptake has been more marked than the business activity, although the Council of Mortgage Lenders has suggested a sluggish start to the year.
This, combined with evidence that the jobs market is improving is likely to bolster demand from potential buyers in the coming months, the building society said.
House prices will probably be flat or rise only modestly over the year, as the beneficial effect of the FLS and greater job activity will be countered by continuing slow growth in the economy, the squeeze on households’ spending power and fragile buyer confidence. .
However, house building and the housing market more widely have been a source of reviving economic activity after recessions. Moreover home ownership has been in steady decline since 2003 and dropped from an all-time high of 70.9 per cent that year to 65.3 per cent last year. So there is also a scenario that rising underlying demand for homes will be helped by easier mortgage availability; and this will be a positive for the wider economy as house builders and other suppliers to the housing market respond.
As an economist at Milsted Langdon, Kevin Butler, is able to share his in-depth research and expert views on a wide range of economic and financial topics.