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Property prices boosted by low mortgage rates

House prices jumped by 1.6 per cent in February from the previous month, with the average house price now £94,965, according to figures from Nationwide.

It says the propoerty market is showing no evidence of slowing down and price growth is being driven by rising prices in the regions outside London, such as the South-west, East Anglia and the East Midlands.

Nationwide says the cause of the house price rises is low mortgage rates, which are driving housing demand. It says a first-time buyer needs to pay out only 23 per cent of earnings in the first year of a mortgage compared with more than 50 per cent 20 years ago.

It says rising house prices are boosting lending values, with the total value of lending being driven by higher numbers of loans at higher average values.

Growth in house prices is increasing demand for releasing equity from properties.

Flexible loans and the ability to withdraw equity when remortgaging have been contributing factors.

The society expects economic conditions will not remain as positive as in 2001 but they will still support higher house prices. A buoyant jobs market is driving up prices and Nationwide says real take-home pay is growing at its fastest rate for two years.

Group economist Alex Bannister says: “House prices continue to rise at a sharp pace. Economic conditions are currently favourable and this has encouraged strong demand for property.

“The past few months have seen a re-emergence of fast price growth rippling out from London to the regions around.”

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