UK house prices rose 7% in the past 12 months and 3% in August alone to an average of £205,006, their highest level since 2005.
London prices leapt 5% in July alone, pushing up the average price by £18,573 to £396,769, according to new research from national estate agents Sequence, published today.
Demand in London is described as "relentless" as new buyers surge 58% annually.
The research follows yesterday's CML figures that showed gross mortgage lending remaining steady in August, which brokers claimed showed the mortgage market was growing at a sustainable rate.
Gross mortgage lending held steady in August at £16.6 billion, CML figures show, down slightly from £16.7 billion in July. But that still marks a 28% rise on August 2012, when gross lending stood at £13 billion.
Today's figures from Sequence give a much more bullish impression of the housing market.
Mark Dyason, director of independent UK mortgage broker, Edinburgh Mortgage Advice, said: "The average mortgage broker continues to be exceptionally busy and demand is rampant.
"The mortgage market is much improved relative to a year ago — the 28% increase compared to last August drives that home — but volumes are still not at normal historical levels. There is a lot of headroom yet."
Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), said: “"Both lenders and brokers have higher expectations for market performance in 2013 following a busy first half of the year. Many lenders will be engaged to a race to the finish to meet their target volumes. But with the Mortgage Market Review implementation looming, they will be careful not to overstretch the mark.”
Richard Sexton, director of e.surv chartered surveyors, said: “The mortgage market recovery is entering a more mature phase. The last six months have seen a dynamic purple patch of lending, which saw a spate of cheaper high LTV deals enter the market and trigger a rush of first-time buyers.
"That initial honeymoon period is over, and lending levels are likely to plateau in the short-to-medium term. First-time buyer numbers are still well below historic levels, as are overall levels of house purchase lending.
"There are still several major roadblocks to a fuller recovery: wage growth is weak, inflation is high, and savings rates paltry. On top of that, rising house prices will price more first-time buyers out of the market."
Brian Murphy, head of lending at Mortgage Advice Bureau, said: "The recovery is being achieved at a steady yet sustainable rate, quashing recent speculation that the situation is snowballing out of control."
Paul Hunt, managing director of Phoebus Software said: “There have been a raft of cheaper high LTV deals coming onto the market which has boosted the first-time buyer market significantly. In fact the number of high LTV house purchase loans being granted is almost 50% higher compared to a year ago. This has resulted in a revival in first time buyer numbers which has made the housing market more fluid.”
David Newnes, director of LSL Property Services, said the market is now flattening out after riding to recovery on the back of Funding for Lending Scheme and Help to Buy. "Life is much easier for buyers with smaller deposits compared to last year, as high-LTV lending increases. Banks are easing lending criteria so that it is not as stringent as before, and mortgage rates are at an all-time low.
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