House prices rose for a sixth month running in October to register their first annual gain since early 2008, the Nationwide Building Society said today.
The rise of 0.4 per cent in October was smaller than the average 1.2 per cent gain of the past five months, but still left prices 2 per cent higher than the same month a year ago -- the first time since March 2008 that prices have risen on an annual basis.
"A moderation in the rate of house price inflation was to be expected, as the very strong monthly increases seen over the summer months were unlikely to be sustainable," said Nationwide chief economist Martin Gahbauer.
The fact that house prices have rebounded even when the economy has been mired in recession has surprised most economists who forecast prices would continue to slide throughout this year.
House prices have risen 4.6 per cent since the start of the year, according to the Nationwide index, after falling almost 16 per cent in 2008.
The average price of a British home is now £162,038, 13.1 per cent below the peak scaled in October 2007.
Interest rates have been held at a record low 0.5 per cent since March and the Bank of England has pumped £175 billion into the economy by buying assets with newly-created money.
The central bank will decide next week whether the weakness of Britain's economy warrants an expansion of its asset purchase programme. It is not expected to raise rates until the middle of 2010 at the earliest.
Nationwide's Gahbauer said favourable borrowing rates should continue to limit the number of distressed sales but noted that house price rises had run ahead of consumer expectations over the summer.
Reuters