British house prices leapt to hit an all-time high in August, mortgage lender Nationwide said on Wednesday, adding to signs of a sharp rebound in the country’s housing market after the coronavirus lockdown.

Prices jumped by 2.0% from July, the biggest month-on-month increase since 2004 and far outstripping the median forecast for an increase of 0.5% in a Reuters poll of economists.

Nationwide said prices were 3.7% higher than a year earlier. The Reuters poll had pointed to a 2.0% annual increase.

“House prices have now reversed the losses recorded in May and June and are at a new all-time high,” Robert Gardner, Nationwide’s chief economist, said.

The COVID-19 lockdown had prompted people to rethink the kind of home they want to live in as well as creating pent-up demand, Gardner said.

Home-buyers have also been given an incentive by British Finance Minister Rishi Sunak, who cut a tax for house purchases in July as he sought to spark the broader economy which shrank by a record 20.4% in the April-June period.

Other measures of the housing market have pointed to bounce-back too.

Data published on Tuesday by the Bank of England showed mortgage approvals rose unexpectedly strongly in July.

“However, most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the after-effects of the pandemic and as government support schemes wind down,” Gardner said.

“If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.”

Sunak has shunned calls to extend his huge, state-funded job retention scheme which is being wound down and is due to expire at the end of October. Economists expect a sharp rise in unemployment in the coming months.

Nationwide said the average price of a home hit 224,123 pounds ($299,876) in August, up from just under 170,000 pounds 10 years ago.

Meanwhile, Britain reaffirmed its commitment to spend 0.7% of national income on aid and development on Wednesday, describing a report that it was seeking to divert billions of pounds from the aid budget to pay for intelligence and defence as “tittle-tattle”.

As the coronavirus crisis eats up government spending, finance minister is grappling with soaring expenditure and an expected decline in tax revenues as the economy is in recession.

Asked if the government’s pledge on aid spending would be honoured, foreign minister Dominic Raab said: “Oh, absolutely. It’s a manifesto commitment, it’s written into law.”

Britain is currently reviewing foreign, defence and security policy, seeking to define a new role for itself in the world after leaving the European Union.

“The chancellor has been clear that if the review isn’t cost-neutral it is only right that any extra spending comes out of the 0.7 per cent,” a Whitehall source was quoted by The Times newspaper as saying. Sunak is understood to believe that the aid pledge should be abandoned or redefined so that the cash could be spent on a wider set of programmes, The Times reported.

A spokesman for the British Treasury declined to comment but Raab, speaking on the day the international development department is merged with the foreign office, dismissed The Times report.

“There’s a load of tittle-tattle, rather colourful, in the media, and I’m not going to prejudice the comprehensive spending review but we’re absolutely committed to helping the bottom billion, to making sure we link up with our wider foreign policy goals, most obviously climate change”, he said.

Separately, Britain’s biggest housebuilder, Barratt Developments, pointed to better advance sales and more home completions over the coming year although it opted to scrap plans for a special dividend payout after annual profit slumped.

Shares in the FTSE-100 company, which competes with Taylor Wimpey and Persimmon, were up 6.6% as the builder of homes in England, Scotland and Wales began its new financial year with “cautious optimism”.

The sector also got a lift after mortgage lender Nationwide said house prices had leapt to hit an all-time high last month.

Britain’s housing market has picked up pace after coming to a virtual standstill from late March, with tax breaks for home purchases and a trend towards suburban living caused by the pandemic spurring home sales.

“Although uncertainties remain, all of our sites are operational, we are seeing very strong consumer demand and our robust financial position means we enter the new financial year with cautious optimism,” said Chief Executive David Thomas.

Barratt’s total forward sales as on August 23 stood at 15,660 homes with a value of 3.71 billion pounds ($4.95 billion), compared with 13,064 homes last year.

Reuters