UK House Prices Jump 8.4% Across 2013IBTimes UK

UK house prices leapt 8.4% across the year in 2013 with December clocking the biggest single monthly increase in over four years, according to Nationwide building society.

Housing market demand has soared off the back of schemes to make mortgages easier to get hold of, such as Funding for Lending and the controversial Help to Buy initiative.

However supply is falling well short, with official figures showing fewer than half of the required housing starts made in 2013.

This mismatch has helped to drive up prices in recent months on top of a buoyant mood around the UK economy which appears to have entered a long-awaited recovery phase.

"A large part of the pickup in the housing market can be attributed to further improvements in the labour market and the brighter economic outlook, which helped to bolster sentiment amongst potential buyers," said Robert Gardner, Nationwide's chief economist and author of the monthly house price index report.

In December, Nationwide said UK house prices rose 1.4% on the month before. It was the biggest single monthly increase since August 2009.

Help to Buy, under which the government supports homebuyers with interest free equity loans or a lending guarantee for banks, has eased the flow of mortgage credit to consumers.

Critics argue it is dangerous to fuel housing market demand without addressing the supply shortage because it runs the risk of creating a bubble, especially as prices are rising when household earnings are in real terms decline.

Proponents say there is much slack in the housing market to cope with up-surging demand; the supply side will react by building more homes; and mortgage approvals are still well below the levels seen before the financial crisis.

Prime Minister David Cameron revealed that in the three months from October when the government guarantee was launched, Help to Buy has supported almost £1bn in mortgage applications from over 6,000 people.

The opposition Labour party warned the Conservatives that housebuilding was at its lowest level since the 1920s and pledged to build 200,000 new homes a year if elected in 2013, though this still falls short of the 300,000 needed to cope with current demand.