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House prices rise unexpectedly as mortgage ‘rate war’ begins

House prices
House prices

House prices rose unexpectedly last month as mortgage brokers battled to offer lower rates to buyers.

Property values jumped 0.2pc between October and November, according to the Nationwide house price index, which reflected the third successive monthly rise.

Analysts had expected prices to fall 0.4pc in November.

This surprise jump means the predicted annual fall in house prices has reduced from 3.3pc to 2pc, putting the average house price at £258,557.

Nationwide’s chief economist Robert Gardner said “a significant change” in the outlook for interest rates next year has sparked the reduction.

He said: “In mid-August, investors had expected the Bank of England to raise rates to a peak of around 6pc and lower them only modestly (to around 4pc) over the next five years.

“By the end of November, this had shifted to a view that rates have now peaked (at 5.25pc) and that they will be lowered to around 3.5pc in the years ahead.

“These shifts are important as they have led to a decline in the longer-term interest rates that underpin fixed-rate mortgage pricing.

“If sustained, this will help to ease the affordability pressures that have been stifling housing market activity in recent quarters, where the number of mortgage approvals for house purchases has been running at around 30pc below pre-pandemic levels.”

Mortgage brokers have said a battle to offer lower rates to buyers has driven the boost in house prices.

Britain’s six largest mortgage lenders are now all offering rates of less than 5pc after a fall in inflation.

Emma Jones, managing director at mortgage specialist When The Bank Says No, said: “With lenders now competing ferociously for business and cutting mortgage rates across the board, there may be some light at the end of the tunnel.”

Steven Hargreaves of Leeds-based independent broker The Mortgage Co said: “The ongoing reduction in mortgage rates is definitely starting to make a difference in terms of demand, although during December, activity levels will likely remain muted for the usual seasonal reasons.”

Katy Eatenton of Lifetime Wealth Management added: “The rate war that is raging between lenders is now really starting to ignite demand for property.”

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