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House prices 'pass pre-recession peak'

House prices have now surpassed their pre-recession peak, at the same time as UK economic output is likely to have expanded beyond the pre-crisis level.Nationwide's latest House Price Index reveals residential property prices rose by one per cent in June. This takes the annual pace of growth from 11.1 per cent to 11.8 per cent.Annual house price gains were recorded across all regions for the fourth month in a row, the data reveals. Growth was strongest in the south of England - particularly London, where prices were up by 26 per cent in the second quarter compared to the same period during 2013.This took the average price of a property in the capital past £400,000 for the first time. House prices in London are now 30 per cent higher than the level recorded in 2007 and more than twice as much as those in the rest of the UK, where they remain 0.4 per cent below their pre-crisis peak.Other reports released in recent weeks have suggested some signs of moderation may be emerging in the housing market. Nationwide says the annual pace of growth in the capital could slow in the coming months, citing anecdotal evidence from surveyors and estate agents in support of this claim.However, the building society's chief economist, Robert Gardner, said the recent decision by the Bank of England's (BoE) Financial Policy Committee to introduce mortgage caps and stress tests is "unlikely to have a significant impact on housing transactions or the pace of price growth in the near term". Mr Gardner pointed out that many mortgage lenders already use these stress tests and high loan-to-income mortgages are relatively rare.He added that, combined with actions such as the Mortgage Market Review, the new measures "should help to limit the risk of house prices becoming detached from earnings without derailing the recovery in the wider housing market". Rising interest rates could also serve to dampen buyer demand, the economist stated; however, he warned supply constraints, which the BoE is unable to influence, remain a significant problem. 

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