House prices climb to all-time high

House prices climbed to another all-time high in November but the pace of growth in property values is continuing to cool, Nationwide Building Society has reported.

Prices across the UK edged up by 0.3% month-on-month on October's previous peak to reach £189,388 on average in November.

The year-on-year uplift in house prices has been slowing down for three months in a row. In November, house prices were 8.5% higher than they were a year ago, compared with an annual increase of 9.0% in October, 9.4% in September and 11.0% in August.

Typical UK house prices surpassed their 2007 peak in cash terms in May this year, and between then and August they had hit a run of new records, before falling back slightly in September and then recovering to a fresh peak in October.

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Throughout the summer, the year-on-year pace of house price growth had been in double digits.

The strength of the housing market recovery seen earlier this year, as consumer confidence in the economy increased and mortgage rates remained at cheap levels, took many commentators by surprise.

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Many lenders are currently offering some of the lowest rates on mortgages that they have ever offered.

A mismatch between the number of buyers flooding into the market and a shortage of properties to choose from had been seen as a strong factor helping to push up house prices. But in more recent months the supply of homes and the number of house hunters appears to have been brought into better balance.

There have also recently been signs of a slowdown in activity as stricter mortgage lending rules, which came into force in April and mean that mortgage applicants have to answer more detailed questions about their spending habits, bedded in.

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Robert Gardner, chief economist at Nationwide, said there is "something of a disconnect" between the recent slowdown in the housing market and the broader economy, which remains generally upbeat.

He said: "Forward looking indicators, such as new buyer inquiries, point to further softness in the near-term.

"However, if the economy and the labour market remain in good shape and mortgage rates do not rise sharply, activity is likely to pick up in the quarters ahead."

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Mr Gardner said that a cool-down seen in the London market over the last few months is only "a part of the story".

He said that housing market activity has been "relatively weak" in recent months, adding: "The number of mortgages approved for house purchase in September was almost 20% below the level prevailing at the start of the year and 27% below the long-term average."

He said the number of housing market sales currently taking place equates to around 4% of the total stock of homes, which he said is "well below" the long-term average of 6%.

Howard Archer, chief UK and European economist at IHS Global Insight, said he expects house prices to increase by about 5% across the whole of 2015. This is in line with a prediction made by economists at Halifax earlier this week, who expect prices to push up by 3%-5% across the UK next year.

Mr Archer said: "With housing market activity appreciably off its early-2014 highs, we suspect house prices will generally rise at a much more sedate rate over the coming months compared to the peak double-digit annual growth rates seen earlier this year."

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