(Bloomberg) -- UK house prices rose unexpectedly for a third month, one of the country’s biggest mortgage lenders said, as a dip in borrowing costs helped revive activity.
The average cost of a home edged 0.2% higher in November from the month earlier to £258,557 ($326,870), Nationwide Building Society said. Economists had expected a drop of 0.4%.
“There has been a significant change in market expectations for the future path of Bank Rate in recent months which, if sustained, could provide much needed support for housing market activity,” Nationwide Chief Economist Robert Gardner said in a report Friday.
Britain’s housing market has defied forecasts for a sharp correction this year as a lack of properties available for purchase buoyed prices. The average value is now about 5.6% below where it peaked in August 2022, roughly half the 10% drop expected for this year.
Strength in the housing market is another sign of life in the UK economy, which the Bank of England expects to stagnate through much of the next year. In an effort to tame inflation, the central bank has lifted interest rates from near zero at the end of 2021 to 5.25%, the most since 2008.
Those increases quelled activity in the housing market, reducing the number of transactions and prompting a drop in prices.
Renewed increases in prices reflect confidence in markets that the BOE’s base rate won’t soar to 6% or beyond as markets had feared earlier in the year, Nationwide said. Investors are betting on the BOE cutting its key rate in the second half of next year, and that has fed through to an easing in the cost of mortgages.
“While mortgage rates are unlikely to return to the lows prevailing in the aftermath of the pandemic, modestly lower borrowing costs, together with solid rates of income growth and weak/negative house price growth, should help underpin a modest rise in activity in the quarters ahead,” Gardner said.
Nationwide said prices are now 2% lower than a year ago, which is the strongest reading in nine months. It contradicts more forward looking data from the property portal Rightmove, which said listing prices posted by sellers fell by 1.7% in November. Mortgage lender Halifax will publish its figures in the coming days.
--With assistance from Mark Evans and Andrew Atkinson.
(Updates with detail and comment from the statement.)
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