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House prices up nearly 9% in London

  • Average price in the capital to £390,720 in October, according to Land Registry
  • Property in North East dropped by drastic 3.1% on September
  • Official support for the housing market scaled back today

The yawning property gap across England and Wales was highlighted again today as figures showed house prices surging nearly 9 per cent in London while values are still on the slide in the North.

London property in October was 8.7 per cent more expensive than in October 2012, taking the average price in the capital to £390,720, according to the Land Registry.

Meanwhile, house prices in the North West and North East of England dropped by 0.7 and 0.8 per cent respectively – in the latter case helped by a drastic 3.1 per cent drop on the previous month.

Huge divide: In contrast to rising property values in London, much of the rest of the country has seen scant growth Property values across England and Wales were up 3.1 per cent on October last year, taking the average price to £165,515, in the biggest annual uplift seen since October 2010.

The Land Registry data throws into relief the tricky balancing act facing the Bank of England and the Chancellor as they try to kickstart the housing market outside the South East while pre-empting a property bubble forming in and around London.

Official support for the housing market was scaled back today as the Treasury and Bank of England announced the Funding for Lending scheme will stop providing new cheap mortgage funding from next year.

Residential property prices in the capital continue to outpace the national average

The Bank’s scheme has driven mortgage rates to record lows while decimating returns on savings, but today’s move to stop extra funding being taken out marks a potential beginning of the end for pumping cheap cash to consumers.

The average house price in England and Wales actually edged down by 0.2 per cent in October from September, the Land Registry said, marking the first drop seen in seven months, which could be down to a lull ahead of the premature Help to Buy launch.

Wales saw the biggest month-on-month increase in prices, with a 2.4 per cent rise over September, pushing the average values to £117,097.

The average price in London stands at £390,720, compared to £96,179 in the North East

The latest phase of the Government’s Help to Buy scheme, offering state-backed loans to people with deposits as low as 5 per cent, was launched in October and the scheme is expected to inject further demand into the housing market in the coming months.

However, fears have been raised that while it will give more people a helping up the housing ladder it will lead to a house price bubble, with borrowers being encouraged to over-stretch themselves.

The Land registry figures also showed that house sales are up by almost one fifth (17 per cent) compared with a year ago.

The latest figures available showed that there were 69,147 house sales a month on average between May and August, compared with 59,138 monthly transactions in the same period last year.

Royal Bank of Scotland, NatWest, Halifax, Bank of Scotland and HSBC are now offering mortgages under the new phase of Help to Buy and other lenders including Santander and Barclays have also confirmed plans to come on board.

There are also signs that lenders outside the scheme are ramping up competition, with Yorkshire Building Society, which is not part of Help to Buy, recently launching a raft of new 5 per cent deposit mortgages onto the market.

But critics argue that without improving the supply of homes for sale, Help to Buy will increase difficulties for those struggling to climb onto the housing ladder by creating a price boom.

Brian Murphy, head of lending at broker the Mortgage Advice Bureau said the announcement that Funding for Lending will be re-focused away from the housing market may ‘ensure a measure of calm going into 2014’.

He said: ‘Help to Buy will ensure demand and consumer confidence continues to grow in the wake of the Funding for Lending Scheme.’

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