Record 20% rise for capital homes

This Is Lancashire: House prices in London have never risen so fast House prices in London have never risen so fast

House prices in London rose by a record annual rate of 20.1% in May as overall growth in the UK climbed to 10.5%, official figures showed today.

The average home in the capital now costs £492,000, compared to £262,000 across the country, according to the Office for National Statistics (ONS).

The annual increase for house prices across the UK is the strongest since May 2010 but for London it is the sharpest since records began in 2002.

The ONS said: "House prices are increasingly strong across most parts of the UK, with prices in London again showing the highest growth."

Prices rose by 9.6% in the South East and 8.6% in the East, the figures showed.

Outside London and the South East, annual price increases averaged 6.4%, the highest rate since June 2010.

On a month-by-month basis, values jumped by 0.8% across the country, compared with a rise of 0.3% a month earlier.

The figures also show that first-time buyers face having to pay 11.3% more to get on the property ladder than they did a year ago, with the typical starter home now costing £202,000.

Every region in England saw an annual price uplift, with the lowest rate of 3.9% in the North West.

Prices overall in England rose by 11% over the year, with a 6.5% increase in Wales and 3.6% in Scotland while prices in Northern Ireland fell by 0.7%.

In London, the house price index is 33.7% above the pre-crisis peak level while England has recovered to just 8.9% above and Scotland, Wales and Northern Ireland still lag behind.

The figures come weeks after the Bank of England moved to put curbs on riskier mortgage lending with a new cap on home loans and stronger checks to make sure borrowers can afford repayments.

William Zimmern, senior economist at PwC, said: "The data shows there is still strong momentum in house prices in London and the South East. But we expect the pace of growth to slow in the second half of the year and into 2015.

"However, both mortgage lenders and borrowers should bear in mind the possibility of a sharper correction, especially in London."

Campbell Robb, chief executive of housing charity Shelter, said: "Once again these figures show that house prices are spinning out of control, putting a stable home even further out of reach for ordinary families.

"Instead, scores of people are either stuck in their childhood bedrooms or forced to bring up children in unstable and expensive rented homes, however hard they work or save.

"With interest rates at historic lows, it is worrying that taking on huge mortgages is becoming a tempting option, and something that could have disastrous repercussions in the future.

"The Government has to start meeting people halfway by committing to building the homes that they can afford."

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