This pushed the annual rate of house price inflation up to 30.6% in October, up from 24.2% in September.
Commenting on the figures Martin Ellis, group economist, said: "Last month's record rise in prices underlines the continuing strength of the UK housing market as the low level of interest rates and falling unemployment drives up demand. Affordability remains very good too: mortgage payments represent 15% of gross earnings for a typical new mortgage borrower, one of the lowest percentages since 1984, and significantly below the long run average of 22%. In addition, there remains a shortage of properties available for sale, which is adding to the upward pressure on prices.”
A 7.8% increase in the price paid by existing owner-occupiers moving home was mainly responsible for last month's rise whilst the prices paid by first-time buyers increased by a relatively modest 1.5%. These figures also show that buyers are being put off buying in the most expensive areas and are increasingly looking to nearby areas for better value. This is causing prices to rise significantly in these areas, narrowing the gap between them and the most expensive areas. The rapid rise in house prices in such places as Loughton in Essex, Smethwick in the West Midlands and St Leonards-on-Sea in East Sussex over the past year are good examples of this.
Regionally, house prices are continuing to increase in the mainstream markets in London and the South East. The North, Yorkshire and the Humber and the South West, however, experienced the biggest price rises in October.
As Ellis said: “Despite the low level of interest rates, the rapid rise in house prices in southern England over the last few years is making it increasingly difficult for potential first-time buyers to get a foot on the housing ladder. Whilst we expect this development to constrain demand, the low level of mortgage payments in relation to earnings means that new borrowers are not over-stretching themselves. There appears too to be little prospect of either a substantial rise in interest rates or unemployment over the next year. House prices are therefore expected to continue increasing although at a slower pace than in recent months."