Housing & Mortgage Round Up: Huge rise in house, whilst home ownership falls


Housing & mortgage round up_istockphotoThis week’s Housing and Mortgage Round Up has a distinctly historical feel to it with research showing an amazing increase in house prices over the last 40 years, whilst another report shows that home ownership has fallen over the past 25 years.

But before that we start with the latest Halifax House Price Index figures.

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Signs of life in the housing market?

The latest figures from the Halifax show prices have risen over the past 12 months, the first time this has happened since October 2010.

The Halifax figures also show that prices rose over the past 12 months by 1.3%, despite a fall of 0.2% in January, and according to the UK’s largest mortgage lender the value of the average home is now £162,932.

In addition to the rise in prices, the Halifax also reported that during 2012 the number of houses sold increased by 5%. Coupled with the rise in house prices this has led some experts to suggest that we could be seeing the start of a recovery in the housing market. However, Martin Ellis, Housing Economist at the Halifax, was quick to strike a note of caution, saying: Ellis again: “The outlook for the UK economy and house prices, however, is more unclear than usual. Subdued economic growth and pressures on household finances are expected to constrain housing demand. Overall, we expect continuing broad stability in house prices nationally in 2013.”

Home ownership falls to lowest level in 25 years

New government figures have shown that home ownership has fallen to its lowest level since 1987.

The English Housing Survey 2011 to 2012 shows that just over 14 million people, equivalent to 65% of the population, own their home, down to levels last seen in the late 1980’s when the Conservative government introduced the popular right-to-buy scheme.

At the peak of the last housing boom nearly 71% of people owned their home. Experts believe the level has fallen back due to the rapid rise in property values, making home ownership unaffordable for some. Furthermore, the tightening of mortgage lending criteria seen after the credit crunch has meant many would-be homeowners have been unable to buy due to a lack of mortgage finance.

The report also showed that more people than ever before are renting their home, with approximately the same number renting in the private sector as in social housing sector. In total just under eight million people are currently renting their home, with other reports suggesting many are frustrated homeowners, often hamstrung by a lack of deposit and tight mortgage lending criteria.

Reacting to the survey and speaking to the Telegraph, Simon Rubinsohn, Chief Economist at the Royal Institution of Chartered Surveyors (RICS), said: “The figures provide further evidence of the shift away from owner-occupation in favor of the rental sector.”

He continued: “RICS believes these broad trends are set to persist. Although the Funding for Lending Scheme has raised the availability of finance for first-time buyers, required deposits are still historically high, limiting accessibility for many.”

43 fold increase in house prices over 40 years

Can you imagine paying £10 for a carton of milk? Well, that’s how much you would have to pay if the cost of this humble household item had risen in line with house prices since 1971.

A new report, from the housing charity Shelter, has shown just how far house prices have risen since the early 1970’s and perhaps goes some way to explaining the figures we looked at a moment ago, which showed home ownership has fallen to levels not seen since the 1980’s.

According to the charity, the cost of the average home has risen from £5,632 in 1971 to £245,319; a massive 43 fold increase.

The huge rise in house prices has undoubtedly benefited many people, however, even taking into account the 20% or so reduction in house prices since the peak of the last housing boom, many people are still unable to get on to the housing ladder, often frustrated by the inability to get a mortgage.

Applying the same price increases to everyday items found in most people’s weekly shopping basket, just emphases how far house prices have risen. According to Shelter, if a bunch of six bananas had risen by the same amount as house prices, they would now cost £8.47, whilst a loaf of bread would have risen to £4.36 and a leg of lamb would set you back an astonishing £53.18.

Commenting on the report, Shelter’s Chief Executive, Campbell Robb said: “The high cost of food is already a real concern for people, so if prices reached these levels there’s no way we’d accept it. Yet when it comes to the huge rise in the cost of buying a home over the past few decades, somehow this is seen as normal – even welcome – despite the impact it’s having on a generation desperate for a home of their own.”

Robb continued: “With more young people and families priced out homeownership is already starting to fall, which in turn is driving up the cost of renting. Unless something changes, the next generation will find it even tougher to get a stable and affordable home.”

Mortgage price war continues

Spurred on by the Funding for Lending Scheme (FLS) banks and building societies are continuing to reduce their mortgage rates, especially on fixed rate products.

Simply put the FLS has enabled mortgage lenders to borrow money from the government at just 0.25%, allowing them to offer these eye catching deals.

This week saw 16 lenders offer five year fixed rates below 3%, with man two year fixed rates now below 2%. Bank of England figures show that two years ago the average five year fixed rate was 5.15%, which has now plummeted to 3.89%.

Despite these unprecedented low interest rates, borrowers have been warned to beware of high arrangement fees which are often charged on these deals and push up the effective cost. The fees can often make the mortgage deal with the lowest headline rate less competitive than other offers with a slightly higher rate of interest.

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

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