The average cost of a UK home edged ahead by 0.3% in February, according to Nationwide.

What’s the latest?

House prices held steady in February but activity is expected to pick up in the coming months as low interest rates and the economic recovery continue to support the market.

The average cost of a UK home edged ahead by 0.3% last month to stand at £196,930, according to Nationwide.

The annual rate at which prices are growing rose slightly to 4.8%, within the narrow range of 3% to 5% seen since last summer.

Why is this happening?

Although the number of mortgages approved for house purchase rose to its highest level for two years in January, Nationwide said much of the increase was likely to have been caused by investors rushing to buy a property before the new higher Stamp Duty rate for additional homes comes into force in April.

Even so, Robert Gardner, Nationwide’s chief economist, said: “Looking through this volatility we expect the underlying pace of activity to increase in the quarters ahead as improving labour market conditions and low borrowing costs provide ongoing support.”

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Who does it affect?

The strong house price growth seen during the past decade has led to a significant fall in homeownership levels, as increasing numbers of people cannot afford to get on to the property ladder.

Nearly 64% of people in England owned their own home in 2015, well down on the peak of 70.9% recorded in 2003.

The impact of higher house prices has been particularly acute for first-time buyers, with younger age groups seeing a marked decline in homeownership levels in the past decade.

Only 37% of 25 to 34 year olds were homeowners in 2015, down from around 57% in 2005.

Sounds interesting. What’s the background?

"...we expect the underlying pace of activity to increase in the quarters ahead as improving labour market conditions and low borrowing costs provide ongoing support.”

The combination of higher house prices and tighter mortgage lending criteria is forcing people to rent for longer.

In fact, 63% of people aged 25 to 34 lived in rental property last year, soaring to 92% among those aged 16 to 24.

The number of people renting in the private sector has risen by 75% in the past decade to 4.3 million.

Ironically, it is the demand for rented homes from people unable to buy their own that has contributed to the rise in buy-to-let investors in recent years.

The competition potential first-time buyers face from these investors has pushed the cost of starter homes higher, taking them further out of their reach.

But there were some signs that property market may be cooling, with mortgage lender Halifax, which also published its house price index today, saying property values slipped by 1.4% in February.

Top 3 takeaways

  • The average cost of a UK home edged ahead by 0.3% during February to stand at £196,930.
  • The annual rate at which prices are growing rose slightly to 4.8%.
  • The number of people who are homeowners has fallen significantly, dropping from a peak of 70.9% in 2003 to 64% in 2015.

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