House prices are surging at their fastest rate for more than three years, stoking fears of a new property bubble.
The average cost of a home rose 0.6 per cent this month and is now 6.5 per cent higher than a year ago, according to the latest figures from Nationwide building society.
The national advance in prices is being fuelled by double-digit growth in London, but rises are now accelerating in other regions.
Across the UK, prices are now only 6 per cent below their 2007 peak.
But Howard Archer, economist at forecasters IHS Global Insight, said: “While the strength of house price rises in London is becoming an increasing concern and pushing up the overall national increase in house prices, we are currently some way off from an overall housing market bubble emerging.” The latest sign of a rapidly recovering property market comes the day after Bank of England Governor Mark Carney moved to put the brakes on the explosion in mortgage lending.
He announced yesterday that the Government’s Funding for Lending scheme — a cheap source of funding allowing banks and building societies to slash their mortgage interest rates to record lows — will be ended for mortgages at the end of the year.
Jonathan Hopper, managing director of London-based Garrington Property Finders, said: “The ... announcement that they’re scrapping Funding for Lending for mortgages couldn’t have been timed worse.
“It is unlikely to slow down price growth in London but could have a devastating impact on areas which have only just started to see the benefits of cheaper lending.”
