(Bloomberg) -- UK house prices rose by the most since March 2022, according to one of the country’s largest mortgage lenders, as wage gains and interest-rate cuts continued to support buyers’ return to the market.
Nationwide Building Society said the average home price rose 1.2% to £268,144 ($340,000) in November, accelerating from last month’s 0.1% rise. Economists were expecting a 0.2% increase. This leaves prices 3.7% higher than a year ago.
“UK house prices jumped in November as greater clarity following the Autumn Budget and the quarter-point rate cut from the Bank of England brought back buyers who had been waiting on the sidelines,” said Niraj Shah of Bloomberg Economics.
The arrival of Labour’s budget on Oct. 30 has also helped end uncertainty that had given some buyers pause. Households were largely spared from the £40 billion of tax increases included in Chancellor of the Exchequer Rachel Reeves’ spending plans.
The UK’s resilient jobs market has helped fuel the rise in activity. Workers continued to enjoy inflation-busting pay rises of 4.8%, while unemployment remained low as companies held on to staff in the face of labor shortages despite feeble demand, according to the latest jobs market figures.
“Solid labor market conditions, with low levels of unemployment and strong income gains, even after taking account of inflation, have helped underpin a steady rise in activity and house prices since the start of the year,” said Robert Gardner, chief economist at Nationwide. “Household balance sheets are also in good shape with debt levels at their lowest levels relative to household income since the mid-2000s.”
Further BOE interest rate cuts would improve affordability, which remains stretched by historic standards. That’s likely to come at a more cautious pace as rate-setters are unsure how businesses will respond to Labour’s increase in employer taxes. Mortgage rates have started picking up again after coming down from around 6% earlier this year.
Still, housing activity was likely to accelerate in the first months of next year when prospective homeowners start rushing in to avoid an increase in stamp duty in 2025. Last week, BOE data showed that mortgage approvals climbed to their highest in over two years in October.
“Providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually,” Gardner said.
(Updates with analyst quote in third paragraph.)
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