House prices rose 1.6% in the three months to October but the pace of growth has slowed, according to the latest Halifax House Price Index published today.
Brokers say fears that Help to Buy 2 will spark a housing bubble have been overdone, as growth outside hotspots in London and the South East remains weak.
Yet housing market activity activity is rising sharply, with home sales in the quarter 21% higher than in the same three months last year.
And the number of mortgage approvals for house prices was 11% higher than in the previous quarter, Halifax said.
The latest quarterly increase in house prices was the smallest since May, when prices also rose 1.6%. It compares with quarterly rises of between 2% and 2.1% in each of the previous four months.
Despite the slowdown in the quarterly rate, the annual rate continued to rise with prices in the three months to October 6.9% higher than in the same three months last year.
House prices increased by 0.7% in October, the ninth consecutive monthly rise. Yet the average price in October remained significantly below the August 2007 peak.
Activity is also significantly below the levels recorded in 2006 and 2007, with Q3 sales still 36% lower than in the same quarter in 2006.
Halifax housing economist Martin Ellis, said:"Demand has increased this year, putting upward pressure on house prices and increasing levels of activity.
"Low interest rates, and higher consumer confidence supported by the increasing evidence that a sustainable economic recovery may now be underway, are helping to increase housing demand.
"Both house prices and sales remain below the levels reached at the height of the last housing market cycle in 2006/2007.
"Sentiment towards selling has also improved in recent months in response to the pick-up in the market, which should help to increase the availability of properties on the market over the coming months."
Lower mortgage payments in relation to income are helping to boost demand. Typical mortgage payments for new borrowers, both first-time buyers and homemovers, accounted for 27% of disposable earnings in Q3, its lowest proportion since Q2 1999 and comfortably below the average of 36% over the past 30 years.
Ben Thompson, managing director of Legal & General Mortgage Club, said the price rises suggest the UK has a two-speed housing market.
"In places like London and the South-East we are seeing prices gather pace quickly which is raising concerns in some quarters about a potential bubble.
"However, in many other parts of the country there are localised market issues that persist. It is for that reason that calls to pull stimulus such as the extension of Help to Buy and worries about a credit bubble are premature.
"People tend to forget that Help to Buy is a temporary measure. If the Government needs to change its terms or withdraw it altogether to avoid the market overheating it can do so."
Comments
Glaring inconsistency in what you say in your other tweeted headline in same edition; "Mortgage rates could rise one year earlier than expected as recovery quickens" ?