10% surge in yearly British house prices a further warning to outlook in Ireland

Tough competition between UK lenders had brought the effective rate on new mortgage lending down to around 1.6% in October

There is a shortages of homes for sale in the UK as well as a pandemic-driven demand for larger properties away from city centres.

House prices in Britain rose more than expected in November as activity held up despite the end of a tax relief for homebuyers, a development that ratchets up the risks for Irish house price inflation taking off further.  

The average price of a home in Britain increased by almost 1% to £252,687 (€297,550), according to the mortgage lender Nationwide, as the pace outstripped even the most optimistic forecasts. The annual rate of growth climbed to 10%.

October saw the ending of a British tax cut on house purchases that has helped fuel a boom since it was introduced in July 2020. But other factors supporting the market remained in place, including shortages of homes for sale and pandemic-driven demand for larger properties away from city centres. 

Irish house prices are rising even faster, at an annual rate of 12.4% in September, and the shortages of houses are even more severe in Ireland than in Britain.   

Borrowing costs in Britain and Ireland have also stayed low but figures from the Bank of England this week showed that tough competition between UK lenders brought the effective rate on new mortgage lending down to around 1.6% in October, the lowest on record. Irish first-time mortgage rates for first-time buyers are significantly higher. 

In Britain, "demand for property remains very strong, while supply is exceptionally weak, and the result is double-digit house price growth,” said Andrew Simmonds, director at Bristol-based Parker’s Estate Agents.

Nationwide warned of a squeeze on living standards for households, with inflation accelerating, UK interest rates poised to rise and tax increases set to hit in the spring. The new Omicron coronavirus variant could make people more cautious about spending, it added.

“While consumer confidence stabilized in November, sentiment remains well below the levels seen during the summer, partly as a result of a sharp increase in the cost of living," the British lender said. 

Bloomberg and Irish Examiner