House Price Update to 8 September 2010

UK House Prices Situation: Regional fluctuations but little real change

UK House Prices Forecast: Slight weakening likely as autumn progresses

Did Prices Rise or Fall in August?

The Nationwide and Halifax House Price Indices are two of the most respected and widely-used barometers of the state of the housing market. As the UK's two largest mortgage lenders, Nationwide and Halifax have a large sample size to draw on. They are also sufficiently timely to reflect what's actually happening currently, rather than what happened a couple of months ago (as with the Land Registry index) or what might happen in the future (as with parts of the RICS Housing Survey).

The problem is that the Halifax and Nationwide indices often disagree on whether prices have risen of fallen in a given month. In August, Halifax recorded a rise of 0.2% but Nationwide recorded a fall of 0.9%. In July, the situation was the same – Nationwide recorded a fall while Halifax recorded a rise.

When reading these reports, I think that the secret is not to place too much emphasis on short term changes; home ownership is a long-term game. It is also important to remember that the figures published in these house price indices are national averages. Changes in house prices happen on a regional, often very local basis. That means that the national average might be falling, but prices in your area may be rising – or vice versa.

Of far more importance to most home owners is how easily they could get a new mortgage deal, should they want to move house. Halifax's latest HPI report did contain some good news on this front. Thanks to falling prices and low interest rates, the average proportion of first-time buyers' income required for their mortgage payments has dropped from a peak of 50% in mid-2007 to just 28% – below the long-run average of 34%. This improvement in affordability is very good news for first-time buyers looking for a mortgage deal, as it means their income will stretch further than it would have done a couple of years ago.

Read about UK House Price indexes / key statistics that track the ups and downs of house prices

Read our take on the Credit Crisis the effect on UK House Prices and Mortgages. A Special Report

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