House prices continue to rise, says Nationwide

House prices have been rising steadily in recent months

UK house prices have risen for the seventh consecutive month, helped by better-than-expected news from the job market, the Nationwide has said.

The building society said that the average home increased in value by 0.5% in November compared with October and now costs £162,764.

The typical home was 2.7% more expensive than a year ago, at a similar level to prices in early 2006.

Separate figures show that mortgage lenders' deposit demands are easing.

Slowing rate

The Nationwide said that the three-month on three-month rate of increase had slowed from 3.5% in October to 2.8% in November.

This measure is generally seen as a truer picture of the market as it cuts out any short-term volatility.

"This suggests that house prices are now rising at a more moderate pace than in the spring and summer months, when they experienced a very strong bounce from the early 2009 lows," said Nationwide chief economist Martin Gahbauer.

But overall there has been some surprise that prices have continued to rise steadily in the recession, with Mr Gahbauer pointing to unemployment figures as a key factor.

"The outlook for the housing market remains crucially dependent on labour market conditions, and here recent developments have been somewhat more encouraging than might have been expected," he said.

"Part of the explanation for why unemployment has not risen to the levels implied by the recession's depth is that in many cases employers have opted to reduce working hours and pay rather than make employees redundant.

"Even though workers who have been forced from full-time employment into part-time work will have experienced a reduction in income, the impact has been less severe than it would have been if they had lost their jobs completely."

This, coupled with low mortgage rates, meant that fewer people than expected were forced into selling their homes which in turn kept house prices steady.

Lenders' trend

There has been a further easing of mortgage rationing in the last month, according to the financial information service Moneyfacts.

Lenders have adjusted to the post-banking crisis world and are starting to relax their lending criteria Michelle Slade, Moneyfacts Homes 'used for pension top-ups'

The number of mortgage deals on offer rose by 5% to 1,425 - the largest number since December last year.

The proportion of those requiring a deposit of between 0% and 15% of a property's value rose from 25% of the total at the start of November to 27% at the beginning of December.

And the proportion of deals needing a 20% downpayment rose from 9% to 11%.

But there was a fall in the proportion of mortgages needing a down payment of 25% or more. They fell from 66% of the total to 62%.

"Lenders have adjusted to the post-banking crisis world and are starting to relax their lending criteria," said Michelle Slade, of Moneyfacts.

"In the last month, we have seen lenders increasing the LTVs [loan-to-value] that their existing deals are available to or launching new deals at higher LTVs.

"Significant increases are being seen in the number of deals available for borrowers with a 10% or 15% deposit. Many house price indices are now reporting a rise in house prices, meaning that the risk of higher LTV loans has lessened."

The Co-operative Bank said that a growing number of its existing mortgage-holders had been paying off their home loans at a faster rate, owing to low mortgage costs.

It said there had been a 56% year-on-year increase in the number of customers making mortgage overpayments.