UK house prices surge to a new record

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by Shaun Richards

This week has been one which will have been received with pleasure at the Bank of England. There used to be a story about the “Governor’s eyebrows” signaling displeasure and disciplining errant financial market players but this week will have only brought a broader smile. Indeed there will have been a race between junior members of staff to bring him this morning’s news.

Annual house price growth accelerated to 7.1% in April, only slightly below the peak of 7.3% recorded in December and up from 5.7% in March. In month-on-month terms, house prices rose by 2.1% in April, after taking account of seasonal effects, the biggest month rise since February 2004. ( Nationwide)

There is so much there for a central banker to enjoy with a monthly surge as well as the annual rise. Indeed the Bank’s PhD’s will no doubt be hard at work calculating the wealth effects from the rise below.

New record high average price of £238,831,
up £15,916 over the past 12 months.

There is a catch though because if you take that number at face value you can compare it to average earnings.

Median annual pay for full-time employees was £31,461 for the tax year ending 5 April 2020, up 3.6% on the previous year; annual pay estimates are largely unaffected by the coronavirus (COVID-19) pandemic.

So as a broad sweep home owners will get around a 50% boost according to the Bank of England wealth effect analysis. No doubt the impact on first time buyers and those trading up which is inflation of 7.1% will have a Nelsonian style blind eye turned to it.

What is going on?

There will be even more cheer at the Bank of England if this from the Nationwide proves to be true.

However, our research suggests that while the stamp duty
holiday is impacting the timing of housing transactions, for
most people it is not the key motivating factor prompting
them to move in the first place. For example, amongst
homeowners surveyed at the end of April that were either
moving home or considering a move, three quarters said this would have been the case even if the stamp duty holiday had not been extended.

If true it means that it has been the Bank of England measures of cutting Bank Rate yo 0.1%, more QE bond buying ( currently £4.4 billion a week) and credit easing which have boosted the housing market. At this point Yazz may be booming out from the Threadneedle Street loudspeakers.

The only way is up, baby
For you and me now
The only way is up, baby
For you and me now

Although there will be the equivalent of a radio edit for this bit.

We’ve been broken down
To the lowest turn
Bein’ on the bottom line
Sure ain’t no fun

Indeed the Nationwide is optimistic looking ahead.

“Housing market activity is likely to remain fairly buoyant
over the next six months as a result of the stamp duty
extension and additional support for the labour market
included in the Budget

Indeed this bit is super-bullish or dare I say it signs of a bubble.

With the stock of homes on the market relatively
constrained, there is scope for annual house price growth to
accelerate further in the coming months, especially given the low base for comparison in early summer last year. Indeed, if house prices remain flat in month-on-month terms over the next two months, the annual rate of growth will reach double digits in June.

One point of detail is something we have been expecting following the rise in recorded savings levels during the pandemic. We thought and feared it would find its way into the housing market.

In the 12 months to February 2021, household deposits increased by £196 billion, equivalent to around £7,000 per household, and almost three times the amount accumulated in the same period the previous year.

The Banks

If the day had not started happily enough for Governor Bailey this will have him singing “Here comes the sun. And I say it’s all right”

The chief executive of Barclays’ (BARC.L) has said the UK economy is on track for its best year since the aftermath of World War II.

“We estimate the UK economy will grow at its fastest rate since 1948,” Jes Staley told the BBC on Friday. “That’s pretty spectacular.” ( Yahoo Finance)

Even better there was a sign of better times for The Precious! The Precious!

The bank made a pre-tax profit of £2.4bn ($3.3bn) on revenues of £5.9bn in the first quarter of 2021. Analysts had expected Barclays to report a pre-tax profit of £1.75bn on revenue of £5.15bn.

Staley said it was Barclays highest quarterly profit in a decade and pointed out that profits were three times higher than they were in the same quarter a year earlier.

Earlier this week Sky reported this about Lloyds Banking Group.

Lloyds Banking Group’s quarterly profits have surged to £1.9bn as the improving economic outlook saw it claw back £459m set aside for loans turning sour.

The earnings for the first three months of the year compare with a bottom line figure of just £74m a year ago as the group – which includes Lloyds Bank as well as Halifax Bank of Scotland – started to make provision for the COVID-19 crisis.

There was something in the detail to raise a smile at the Bank of England.

Lloyds also said mortgages were up by £6bn over the period with March seeing the highest level of completions on home loans since 2008.

According to the Evening Standard even the perenially accident prone NatWest is having a better run.

NatWest Group posted an 82% surge in first-quarter profits as it joined rivals Lloyds and HSBC in cutting reserves for debts that may turn sour due to the pandemic.

The taxpayer-backed group, which is 59.8% owned by the Government, reported pre-tax operating profits of £946 million for the first three months of 2021 against £519 million a year earlier.

Although it was accident prone when it was called RBS which was a major reason for the name change.


Small Banks

There was a hint yesterday from the Bank of England’s Victoria Saporta of an easier life for smaller banks.

Putting this evidence together, we can ask whether there are requirements which are relatively more costly for small firms to implement but which deliver fewer benefits than when they are applied to large firms. And that is what we do in this Discussion Paper. Having identified requirements which do not make a material contribution to the safety and soundness of small firms, a simpler regime will put in their place simplified or scaled back requirements.

The speech has a lot of buzzword bingo with words such as “strong” and “resilience” which often mean the opposite of what you will find in the Oxford English Dictionary.


We see a situation that was described some years ago by The Whispers.

And the beat goes on
Just like my love everlasting
And the beat goes on
Still moving strong on and on

Like so many other central banks the Bank of England knows that its power to affect the real economy is limited but it can pump up house prices and claim it as a wealth effect. Unlike the Nationwide I believe that the Stamp Duty cut has added to this. With supply restricted by the pandemic this means that prices have gone higher again. So the gap between earnings/wages and house prices gets ever wider even assuming you believe the official wages series which I do not.

From the Bank of England’s point of view this is a double whammy because it also boosts the mortgage book of the banks. The only undercut to that is the fact that they will be lending at ever more inflated prices but some of that will be passed onto the taxpayer.

We’re proud to support the Government’s Mortgage Guarantee Scheme, which can help people get the keys to their new home with just a 5% deposit. The scheme is available to first time buyers and home movers. ( HSBC)

These days we seem to bail out the banks even before they fail…..

Apologies for the incomplete post that was released earlier.



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