People up and down the country are celebrating after Nationwide revealed that house prices have returned to 2008 levels – equity is rising and there is more hope for the home owning nation.

According to the building society's latest House Price Index, house prices were up 0.9% in September, down from the August rise of 1.4%, but still enough to add another thousand pounds to people's equity – the average price is up to £161,816, up from £160,224 in August.

But the most important statistics for homeowners is that the annual change, which is the difference between last year's prices and this year's, is at 0.0% – prices have returned to 2008 levels. This is great news, and unexpected news.

Martin Gahbauer, Nationwide's chief economist, says: "The further increase in house prices is very much consistent with improvements in a broad range of economic and financial indicators over the last few months, all of which suggest that the most intense phase of the recession and financial crisis has probably passed.

"However, given that the housing market still faces considerable headwinds in the form of high unemployment, restrictive credit conditions and an impending withdrawal of the stamp duty holiday, it would be surprising to see house prices continuing to increase at the very strong rate seen in recent months."

We are not out of the woods yet. Although equity has risen, it is still tough for many to use that equity, be it in the form of a secured loan or a new mortgage or remortgage. That means many people may have to sit tight for the next few months. So talk to your mortgage adviser by all means and see what you can do to make your financial life easier over the medium-term, but don't expect miracles straight away.

Gahbauer says: "Lead indicators, such as mortgage approvals for house purchase, suggest that turnover should continue edging higher over the next few months, but at the current rate of increase it would take another 18 months for it to reach pre-downturn levels."

SOURCE: Nationwide, 02/10/09

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