British house prices rose at their fastest annual pace in two years in November, adding to signs of resilience in the property market despite high borrowing costs, data from mortgage lender Nationwide showed on Monday.
Prices rose by 3.7% in November compared with the same month last year, Nationwide said, significantly faster than October's 2.4% increase and the biggest jump since November 2022.
On a monthly basis, prices surged by 1.2%, up from just 0.1% in October and the biggest increase since March 2022.
Both the annual and monthly increases were stronger than all economist forecasts in a Reuters poll.
"The acceleration in house price growth is surprising, since affordability remains stretched by historic standards, with house prices still high relative to average incomes and interest rates well above pre-COVID levels," Robert Gardner, Nationwide's chief economist, said.
Other housing market measures have also suggested increased momentum. Figures from the Bank of England last week showed lenders approved the most mortgages for house purchases since August 2022.
The BoE reduced borrowing costs last month for only the second time in four years and said future rate cuts were likely to be gradual.
Elliott Jordan-Doak, senior economist at Pantheon Macroeconomics, said last month's surge likely reflected the impact of BoE's November interest rate cut and finance minister Rachel Reeves' first budget on Oct. 30.
"The Chancellor’s decision to end stamp-duty threshold reliefs in April could see homebuyers bringing forward purchases of homes before the deadline, boosting house prices in the short term but leading to weaker demand after than would otherwise have been the case," Jordan-Doak said.
Reeves said in October she would not extend a lowering of the threshold at which stamp duty is paid on homes beyond its expiry in March 2025. She also said stamp duty paid on second homes would increase by 2 percentage points to 5% from April.
Despite that, Gardner expected the housing market to continue to strengthen.
"Providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth," he said.
Prime Minister Keir Starmer's Labour government, which came to power in July, has promised to boost economic growth and reform the planning system to allow for more construction.
It has also set mandatory targets to speed up house-building, though the shortage of home supply is likely to remain a factor pushing up prices in the medium term.
(Reporting by Suban Abdulla; editing by Sarah Young, William Schomberg and Bernadette Baum)
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