Housing & mortgage round up: Last round up and house price survey of 2012


Housing & mortgage round upOur last housing and mortgage round up of 2012 wouldn’t be complete without a house price survey and we’ve not let you down.

In other news, another mortgage lender has stopped offering interest-only mortgages, there are fears that average rents will rise quickly in 2013 and first time buyers appear nervous about what the New Year might hold for them.

Small annual rise in house prices

The latest figures from the Office for National Statistics (ONS) show that house prices increased by just 0.2% in October.

The ONS also revealed figures showing house prices actually rose, albeit by a modest 1.5%, over the past year, taking the average house price in the UK to £231,000.

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Other recent house prices surveys, including those from the Halifax and Nationwide, two of the UK’s largest mortgage lenders, have shown a small fall in house prices. Whatever the exact figure, whether house prices have risen or fallen slightly, it’s clear that the market has been sluggish over the past 12 months.

Where the ONS figures differ significantly though is when it comes to the average house price.

The ONS put the average price of a home at £231,000, significantly above the figure given by other surveys. The latest figures from the Halifax puts the average price of a home at £160,879, whilst the Nationwide believe it is £163,853 and finally the Land Registry report the figure as being £161,605.

The ONS said: “House prices continue to remain relatively stable across most of the UK, although prices in London are increasing and prices in Northern Ireland are falling.”

“The year-on-year increase reflected growth of 1.8% in England and 2.8% in Wales, which were offset by a decline of 2.2% in Scotland and 11.7% in Northern Ireland.”

First time buyers pessimistic about the future

A new survey has shown just how pessimistic some first time buyers are about the housing market.

The research done by the Building Societies Association (BSA) has found that one in four would-be first time buyers think it will take 10 years to save a deposit large enough to allow them to buy their own home. Even more prospective first time buyers, one in five, believe they will still be living in rented accommodation or with family in 10 years’ time.

The survey emphasised the huge differences in the mortgage market since the financial crisis. Before the credit crunch 88% of first time buyers were able to save a large enough deposit in five years or less, this figure has now fallen to 62%; confirming the tougher lending criteria imposed by lenders and the lack of availability of higher loan to value mortgages.

There was however, a small sign that things are perhaps getting slightly better for first time buyers. This time last year 64% of would-be first time buyers said that saving for a deposit was a barrier to buying a home, a year later, in December 2012, this figure had fallen to 59%; still a large percentage, but perhaps cause for some mild optimism.

Catch 22 for first time buyers as rents are predicted to rise

Whilst the housing market is static, or indeed stagnant depending on your point of view, the rental sector is booming.

A survey by the Royal Institution of Chartered Surveyors (RICS) has shown that rents are predicted to rise by 4% in 2013; more than the expected rise in house prices and above the current level of inflation and wages growth.

We’ve discussed many times in our ‘Housing & Mortgage round up’ the problems facing first time buyers and rising rental costs are certainly not helping would-be homeowners to save the deposit needed.

The catch 22 for prospective first time buyers means that they have to rent because they haven’t been able to build up a large enough deposit, this increases demand for rented accommodation, which in turn pushes up rental prices, making it even harder to save the deposit.

Simon Rubinsohn, Chief Economist at RICS said: “Even with the Funding for Lending scheme and some other government policies beginning to be felt in the mortgage market, many first-time buyers will continue to find it difficult to secure a sufficiently large loan to take an initial step on the housing market.

“Meanwhile, the alternative of renting is becoming more and more costly with a further increase in rents likely in 2013.”

Another lender pulls out of the interest-only mortgage market

The Newcastle Building Society, the 10th largest in the UK, has become the latest in a long line of lenders to pull out of offering interest-only mortgages to new borrowers.

Interest-only mortgages, popular over the past three decades, have been the subject of increased scrutiny since the financial crisis, with the FSA imposing new rules on mortgage lenders resulting in many pulling out of the market completely.

Announcing the decision, the Newcastle said that existing loans would not be affected, but further advances would have to be arranged on a capital repayment basis.

The move by the Newcastle will further reduce choice for borrowers, typically the self-employed and people who receive large bonuses, who like the flexibility that an interest-only mortgage provides.

Our mortgage adviser, Linda Wood , is here to help you. If you would like advice on your options or you are affected by any of the stories in this week’s housing round up please call Linda today on 0115 933 8433, alternatively enquire online or email linda.wood@investmentsense.co.uk

Your home may be repossessed if you do not keep up repayments on your mortgage.

For providing mortgage advice we will charge an application fee of £300 and we may also be paid a fee from the lender, any fee paid by the lender will be disclosed to you. Alternatively we will charge an arrangement fee of 0.5% of the loan and refund to you any payment received by us from the lender.