House prices continue to rise in August

Average price of a house is now £170,514

(PA)

Latest house price figures from Nationwide suggest that house prices rose 0.6 per cent in August and were 3.5 per cent higher than August 2012.

Robert Gardner, Nationwide's Chief Economist, said measures such as the Funding for Lending and Help to Buy schemes are enabling more people to take their first steps into the property market.

"While there have been encouraging signs that house building is starting to recover," he said, "construction is still running well below what is likely to be required to keep up with demand. The risk is that if demand continues to run ahead of supply then affordability may become stretched. While house prices are still elevated compared with incomes, affordability is being supported by the ultra low level of interest rates. A typical mortgage payment for a first time buyer is currently equal to around 29% of disposable income, in line with the long term average.

Jonathan Harris, director of mortgage broker Anderson Harris, said: "House prices continue their steady ascent, driven by increased confidence in the economy generally and rising employment. The uptick in prices is also fueled by the rising number of first-time buyers taking advantage of low mortgage rates, indicating that price rises are not yet deterring them from getting on the housing ladder. However, if prices continue to rise at this pace, it could well become an issue.

"Government schemes such as Funding for Lending and Help to Buy will continue to support the growing availability of cheap mortgages in coming months, which should fuel further price increases. However, once interest rates start to rise there could be plenty of people who find themselves in difficulty so it is important that borrowers take care and ensure they don't overstretch themselves in their desperation to become a homeowner."