Nationwide Building Society's House Price Index

Summary

The UK's second largest mortgage provider, the Nationwide Building Society, produces its own Nationwide House Price Index. This is mix adjusted, taking into account characteristics of properties sold over time and is also seasonally adjusted, to take into account traditional strong and weak months for the housing market. It is similar to figures produced by rival mortgage provider, the Halifax, as it is based on its own mortgage transactions at the approval stage, rather than at completion. Nationwide says that any regional bias in its house price figures due to its larger customer base in the south east of England are ironed out through the process of being mix adjusted.

Data

Nationwide bases its index on its own mortgage approvals. Unlike Halifax, however, it covers only 10% of the mortgage market. Nationwide only takes into account owner occupied properties and houses sold at "true market prices", i.e. no council estate sales etc. Nationwide has been publishing quarterly property price reports since 1952, and monthly indices since 1993. Like the Halifax, this is a volume-weighted index of typically transacted house prices.

Method

Nationwide states that it uses mix-adjustment, yet in fact its methodology is very similar to the Halifax and also uses the hedonic regression model. It estimates the price of a 'typical' house in relation to various characteristics; yet, the Nationwide definition of the 'typical' house is revised every year. Nationwide also revises its regional weighting in accordance with rolling averages from HM Land Registry, Department of Communities and Local Government as well as its own mortgage approval data. A full explanation of the Nationwide index methodology is available via the Nationwide website.

Disadvantages

• As with the Halifax's figures the Nationwide's focus on mortgage approvals rather than completed deals means it can never be wholly accurate as some deals may fall through just before completion
• It is only a snapshot of the market as it is restricted to its own customers. Nationwide also has a relatively smaller customer base, accounting for just 10% of the market
• Its starting point of 1993 is more up to date than Halifax's figures but is still a little out of date

Advantages

• As it is based on mortgages approved it can provide more up to date information than figures based on completion, which can take months
• Its average house price will be more accurate than Halifax's as it has 1993 information rather than 1983 information as a starting point

Verdict

Like the Halifax index, the Nationwide house price index concerns the price of a typically transacted property; its main advantage is its timeliness, the main disadvantage data inaccuracy.