The average UK house price rose by 25.3%, or £23,662, during 2002, according to the latest figures from Nationwide.
Average prices rose 1.7% in December, to close the fastest year of house price growth since 1989. Nationwide estimates that total gross mortgage lending will have topped £215bn in 2002 – up 36% on 2001.
This would make last year's mortgage lending the highest on record at over two times greater than lending at the peak of the 1980s boom in today's money. Remortgage and record levels of equity withdrawal continue to boost lending, with the former accounting for nearly 40% of all lending.
The lender foresees a slower housing market in 2003, as borrowers face the prospect of higher mortgage rates alongside higher unemployment and weaker real income growth.
But Nationwide insists there is no crash around the corner. Alex Bannister, group economist, says: “Conditions are broadly positive and our research suggests that UK prices will rise by 10%. This means that London is likely to see growth around 5% while the North closer to 15%.”
Bannister adds: “At a more localised level it is highly likely that we will see price falls even if these are not sustained for a prolonged period.”
Region by region breakdowns show Yorkshire and Humberside topping the growth table for the first time, with the average house valued at £91,480 by the end of 2002 – up 35% in one year. House prices rose by more than 30% in the South-West and West Midlands, with East Anglia and the Outer South East also recording strong rises.
London dropped down the house price growth league to finish up on 21%, with only Scotland and Northern Ireland below.
Bannister attributes regional differentials to a ripple effect that is seeing housing hotspots moving away from the South-East onto the Midlands and East Anglia, and finally to Wales and the North.
He says: “Given past experience we would expect to see prices in areas such as Wales and the North to continue rising rapidly throughout most of 2003. Although the ripple is becoming more marked we do not expect a repeat of the collapse in prices seen during the 1990s.
“Prices in London fell by nearly 50% in real terms from the peak in 1989 to the trough in 1993. This time around better affordability due to low real mortgage rates suggests that the market is more secure and although values are high we do not believe there will be a house price crash in 2003 unless there is a marked change in confidence.”