Average house price passes record £250k

... as millions hold breath for ruling on interest rates

THE average UK house price has topped the quarter-million pound mark for the first time.

It hit £250,311 last month, having grown by almost 10 per cent in the past year, according to a survey by the mortgage lender Nationwide.

But homeowners face rising loan costs with a Bank of England decision on interest rates today.

City experts believe rates could rise from the current record low of 0.1 per cent to 0.25 per cent to keep a lid on spiralling prices, but warned it is the most unpredictable Bank decision in years.

House prices have soared over the past two years, in part due to a stamp duty holiday during the pandemic that created a surge in demand. Momentum continued after the tax break ended in September, with the Nationwide survey showing that prices have risen by £30,728 since the start of the Covid crisis in March last year.

It means the cost of the average UK home has risen almost fivefold in 30 years, climbing from £53,000 in October 1991.

The market has also been spurred by buyers looking for more indoor and outside space, but bigger properties have not been plentiful. This has led to intense competition in rural and coastal areas such as Salcombe in Devon and Padstow in Cornwall.

Nationwide’s Robert Gardner said: ‘Mortgage applications remained robust in September, more than 10 per cent above the monthly average recorded in 2019.

‘Combined with a lack of homes on the market, this helps to explain why price growth has remained robust.’

Economists said the continued growth was also down to record high levels of household savings as people stuck at home during the pandemic reduced spending.

But with inflation currently at 3.1 per cent and predicted to rise above 4 per cent next year, there could be more uncertainty ahead.

All eyes will be on the Bank of England today as it tries to keep the economic recovery on course while combating soaring prices.

The outcome of the interest rate decision will be one factor affecting house prices.

Economists say a rise to 0.25 per cent is likely but warn it could be as high as 0.5 per cent. This would add £355 to the annual cost of servicing the average floating rate mortgage, Nationwide warned.

The cost of mortgage deals has been increasing in the past week in anticipation of a rate rise.