House prices surge higher in August

sold signsHouse prices surged higher again in August as Government schemes and improved mortgage lending continued to fuel the revival in Britain's housing market.

Property values rose by 3.5% year on year, taking the average price for a UK home to £170,514, according to Nationwide building society.

This marked a slight fall on the 3.9% surge seen in July, which was the biggest annual rise for three years.

Prices rose 0.6% between July and August, which was also marginally lower than the 0.9% monthly hike seen in July.

But Nationwide said the quarter-on-quarter cha nge showed underlying price rises have remained robust, up 1.4% in the three months to August - the strongest pace of increase since mid-2010.

The data comes after Bank of England governor Mark Carney warned earlier this week over the risks of another housing bubble amid fears that Government stimulus measures are stoking unsustainable price rises.

He said the Bank is " acutely aware" of the potential threats and said action will be taken to clamp down on mortgage lending if needed.

The Bank could step in and ask lenders to restrict borrowing terms or even force banks to hold more cash on their balance sheets to dampen down an overheated property market.

Policy measures such as Funding for Lending and Help to Buy are boosting the market as they help first-time buyers in particular on to the property ladder.

Figures from the Council of Mortgage Lenders recently showed that first-time buyers accounted for 45% of house purchase loans in the second quarter - the highest since records began in 2005.

The Funding for Lending Scheme incentivises banks and building societies to lend more in return for discounted loans, and has been credited with improving mortgage availability and reducing rates.

Chancellor George Osborne also launched Help to Buy in April, which allows people to buy a property with a 5% deposit.

The State lends buyers 20% of the value of a new home worth up to £600,000, interest-free for five years.

But there are concerns that these schemes will push up house prices and borrowing levels, rather than spurring on more new home construction.

Robert Gardner, Nationwide's chief economist, said: "While there have been encouraging signs that house building is starting to recover, construction is still running well below what is likely to be required to keep up with demand."

He added: "The risk is that if demand continues to run ahead of supply affordability may become stretched."

© 2013 Press Association