UK house prices reach yet another record

by Shaun Richards

Today I am reminded of the sequence in one of The Matrix series of films when the Frenchman tells us about cause and effect. That is because as I wait for another signal of the cause we have seen the effect already.

May saw a further acceleration in annual house price
growth to 10.9%, the highest level recorded since August
2014. In month-on-month terms, house prices rose by 1.8%
in May, after taking account of seasonal effects, following a
2.3% rise in April.  ( Nationwide )

As DJ Jazzy Jeff and the Fresh Prince put it.

Boom! shake-shake-shake the room
Boom! shake-shake-shake the room

In case you did not think that the next bit rams it home.

New record average price of £242,832, up
£23,930 over the past twelve months.

That means that the average UK house earned more than its owner over the last 12 months because in general ( for a first house or flat) gains are tax-free. So it needs to be compared to net rather than gross income.

We also know that the low level of transactions seen last year has also been replaced by a boom.

The market has seen a complete turnaround over the past
twelve months. A year ago, activity collapsed in the wake of
the first lockdown with housing transactions falling to a
record low of 42,000 in April 2020. But activity surged
towards the end of last year and into 2021, reaching a record high of 183,000 in March,

The Nationwide thinks that there is much more to it than the Stamp Duty holiday.

Amongst homeowners surveyed at the end of April
that were either moving home or considering a move, three
quarters (68%) said this would have been the case even if
the stamp duty holiday had not been extended. It is shifting
housing preferences which is continuing to drive activity,
with people reassessing their needs in the wake of the

The so-called race for space seems to also be in play. Also the pandemic seems to have given many the equivalent of itchy feet.

At the end of April, 25% of homeowners surveyed said they
were either in the process of moving or considering a move
as a result of the pandemic, only modestly below the 28%
recorded in September last year. Given that only around 5%
of the housing stock typically changes hands in a given year, it only requires a relatively small proportion of people to follow through on this to have a material impact.


It looks as though all the activity has had a consequence here.

The UK’s biggest builders’ merchant has warned customers of “considerable” cost increases to raw materials amid an industry-wide shortage.
As first reported by the Times, Travis Perkins says the price of bagged cement will rise by 15%, chipboard by 10% and paint by 5% from Tuesday.

It comes as industry groups warn electrical components, timber and steel are also in short supply.

They blame surging demand as lockdown eases, as well as supply chain issues. ( BBC)

Much of the explanation will be familiar to regular readers.

The supply problems stem from a number of factors. Construction industry projects have surged since lockdown began easing which has led to skyrocketing demand for already scarce materials.

There are also issues hitting specific products, such as the warmer winter affecting timber production in Scandinavia while the cold winter weather in Texas affected the production of chemicals, plastics and polymer.

There has also been a sharp rise in shipping costs amid the pandemic.

Mortgage Rates and Credit

This gets a minor mention from the Nationwide.

especially given continued low
borrowing costs, improving credit availability.

In terms of credit availability I presume they mean this change highlighted by Moneyfacts.

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May 2021 has seen a surge in the number of 95% loan-to-value (LTV) mortgages available. Our latest data (to May 25 2021) shows 174 mortgages are now available at 95% LTV. The growth of product availability followed the launch of the new Mortgage Guarantee Scheme (MGS) and there are now 49 mortgages available under the scheme.

Remember the days post credit crunch when politicians queued up on the media to say never again to this sort of thing? I guess we are not quite back to what had happened but we are back on that road. Still the banks will be pleased that the taxpayer is assuming a fair bit of the extra risk.

There is a lot going on.

The availability of mortgage deals at 95% LTV is changing daily as lenders launch and close new products due to high levels of borrower demand.

But the best deals as of the end of last week were 3.49% variable and 3.59% fixed-rate.

For those with higher equity ( 40%) May has seen offers of less than 1%.

TSB offers 0.99% (3.2% APRC) on a two year fixed deal, which is available at a 60% loan-to-value (LTV) and charges £1,495 in product fees. Hinckley & Rugby Building Society offers 0.99% (4.5% APRC) as a two year discounted variable, which is also available at a 65% LTV and requires a minimum loan of £100,000. It charges £699 in product fees.

That still feels rather extraordinary even in these times of zero interest-rate policy or ZIRP. Although the numbers are flattered by the fees involved.

Moneyfacts also suggest that there is something going on in the price of credit  for buy-to-let.

Landlords looking to lock into a fixed

Our research into the BTL mortgage market has found that since the start of this month, the average two year fixed BTL rate has fallen by 0.04%, down from 2.99% on the 1 May to 2.95% on the 21 May. Meanwhile, the average five year fixed BTL rate

has fallen by 0.05% during this same period, down from 3.35% to 3.30%.

A sign of what Nelly would call “its getting hot in here” would be borrowing spreading into other types of finance.

Data  from the Association of Short-Term Lenders (ASTL) shows the demand from consumers and businesses to get a bridging loan in the UK has increased at the start of 2021.  Applications have exceeded pre pandemic levels by just over a quarter and the value of these was up 18% comparing Q1 2021 to the same period in 2020.


The record on the Nationwide series for this was 6.4 back in late 2007 and the first quarter of this year showed 6.3 so with the increases we look to be back to the highs. Frankly if we look at what has happened to wages I think there must be some heroic assumptions here to keep it at that.

There is a similar situation for first-time buyers except the numbers are 5.4 and 5.3 respectively.


We will find out more tomorrow about a major driver of this which is the credit easing and monetary expansionism of the Bank of England. I note that they are increasingly deploying open mouth operations on the subject. Today’s effort comes from Sir David Ramsden in the Guardian who is apparently monitoring things.

The Bank of England is carefully monitoring Britain’s booming housing market as it weighs up the possibility that a rapid recovery from the Covid-19 pandemic will lead to a sustained period of inflation, one of its deputy governors has said.

A career as a civil servant is an odd way to become the expert on financial markets you might think.

Ramsden, the deputy governor responsible for markets and banking, said: “There is a risk that demand gets ahead of supply and that will lead to a more generalised pick-up in inflationary pressure. That’s something we are absolutely going to guard against. We are looking carefully at the housing market and a raft of real-term indicators.”

Those looking at the rise in house prices might think that Dave ( as he prefers to be called) is not much of a guard dog. I wonder if he thinks anyone will be convinced by this?

Ramsden said the Bank would not be complacent about inflation. “If it is not temporary we know what to do about that. We can push bank rate up from its historically low level [0.1%] and we know what that will do to demand.”

Meanwhile we have learned over time that the road to ever easier monetary policy and lower interest-rates comes pre-loaded with denials of any such intention. It is a form off PR for central bankers.

From August the Bank’s monetary policy committee will have the ability to push bank rate below zero but Ramsden hinted strongly that he would be wary about such a groundbreaking step.



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