House prices rose for the fourth month in a row, according to the Nationwide Building Society's latest snapshot of the market.
The society said the average price of a home is now £160,224 – a 1.6 per cent increase on the figure of £158,871 that it recorded in July. Prices are still well down on the same period last year, but the rate of decline has slowed dramatically. Nationwide said prices were down by 2.6 per cent on last year, while in July they showed an annual fall of 6.2 per cent.
The figures are the latest in a series of measures suggesting that the market is now showing signs of a sustained recovery, although economists remain cautious and have warned that there is still the potential for this to be knocked off course. Ironically, one thing that could do this would be if the economy started to recover strongly, requiring interest rate rises, although the Bank of England's Monetary Policy Committee has predicted that rates will remain at very low levels for several months.
Nationwide said it believed the positive signs in the market were being driven by the sustained period of record low interest rates. Martin Gahbauer, Nationwide's chief economist, said: "The exceptionally low level of interest rates offers some explanation for why house prices have not repeated the very sharp falls of 2008."
Mr Gahbauer said this meant mortgage payments for existing home-owners, especially those with tracker or standard variable rate loans, have been reduced substantially.
Before the MPC began cutting rates, he said, the average interest and principal payment per mortgage-holder represented about 38 per cent of average income after tax. But the cuts have meant that this has now fallen to just 28 per cent of post-tax income, despite historically high levels of outstanding mortgage debt.
Mr Gahbauer also said the three month on three month comparison of property prices – which is seen as a less volatile measure than the month on month data – showed a rise of 3.3 per cent in August, compared with 2.7 per cent in July.
Gary Smith, president of the National Association of Estate Agents, said he was hopeful the signs of recovery would continue: "The latest statistics from Nationwide appear to confirm that the housing market has finally bottomed out and indications are that we are hopefully moving to a point where the gradual recovery in prices witnessed this year will be sustained."Reuse content