UK house prices show unexpected strength in October -Nationwide

FILE PHOTO: Residential housing in south London

LONDON (Reuters) - British house prices rose last month at a faster rate than expected as robust demand and a lack of new homes coming to the market kept up momentum, a survey showed on Wednesday.

Mortgage lender Nationwide said house prices rose by 0.7% in monthly terms in October after a 0.2% rise in September. A Reuters poll of economists had pointed to another 0.2% increase.

The increase left house prices 9.9% higher than a year previously, although this marked the weakest annual growth rate since April.

Overall the survey underlined the strength of Britain's housing market during the COVID-19 pandemic. Even the gradual withdrawal of tax breaks on property purchases over the last few months has failed to seriously dampen momentum.

"We expect house prices to continue to beat expectations in the near term before a gradual rise in mortgage rates applies the brakes in the second half of 2022," said Andrew Wishart, property economist at Capital Economics.

The outcome of Thursday's Bank of England interest rate decision is one determinant of house prices in the months ahead.

Financial market pricing suggests BoE rate setters are likely to raise borrowing costs - although economists are less certain and many think the BoE will wait until February. [ECILT/GB]

"The outlook remains extremely uncertain," said Nationwide chief economist Robert Gardner.

"If the labour market remains resilient, conditions may stay fairly buoyant in the coming months – especially as the market continues to have momentum and there is scope for ongoing shifts in housing preferences."

(Reporting by Andy Bruce; Editing by Sarah Young and Catherine Evans)