British house prices rise at fastest pace for more than three years
Nationwide points to 5.8pc price rise in October on back of expanded 'Help to Buy' scheme; Bank of England plays down bubble fears
British house prices rose at their fastest annual pace in more than three years last month, helped by government schemes to boost lending and a brighter economic outlook, data from mortgage lender Nationwide showed.
Last week, Bank of England governor Mark Carney said higher house prices were one of the main factors driving Britain's economic recovery, and played down concerns that the rapid increase risked turning into a bubble.
Nationwide said house prices in October were 5.8 per cent higher than a year earlier, compared to a 5 per cent rise the month before. This was the biggest annual jump since July 2010 and above economists' forecasts of a 5.1 per cent rise.
Prices in the three months to October rose at the fastest rate since the end of 2009, when there was a brief rebound from price falls of around 20 per cent due to the financial crisis.
"The ability to buy has been supported by continued gains in employment and policy measures ... which have improved the availability and lowered the cost of credit," said Nationwide's chief economist Robert Gardner.
At the start of last month, Britain's government expanded its "Help to Buy" scheme to make it easier for home-buyers to get a mortgage for more than 80 per cent of the value of a property.
The government hopes the scheme will spur the construction of new homes, but many economists expect its main impact will be to push up house prices further.
Analysts at UBS Wealth Management forecast that prices would rise 10 per cent next year, which they said could add 0.9 per cent to gross domestic product over time, mostly due to wealth effects boosting consumer morale.
However, Nationwide warned that the affordability of housing would become stretched without further construction.
For now price rises are concentrated in London and surrounding regions, and the Bank of England has played down suggestions that a price bubble may be building.
House prices are around 7 per cent below the peak reached in late 2007, Nationwide said.