If you’re a first-time buyer, then you may wish to look away now. That’s because according to Nationwide, the average price of a UK property now stands at an eye-watering £250,011. This suggests that a massive £30,000 has been added to the average value of a home since the pandemic began.
So, if you’re a first-time buyer, are you likely to get a break any time soon?
Nationwide House Price Index: What did it reveal?
According to Nationwide’s latest House Price Index, the average UK home now costs £250,011. That’s an increase of 9.9% year on year, and up slightly from the 0.7% increase reported in September.
While Nationwide’s latest figures indicate that house prices are continuing to defy the odds, other major house price indices, from Halifax and the Office for National Statistics, suggest that average house prices passed the quarter of a million mark earlier this year.
How much have house prices increased?
According to House Price Crash, 25 years ago, the average house cost just £51,367.
Ten years later, the average price of a house had risen to £160,319. Fast forward another ten years, to 2016, and the average price had risen even further, to £198,564.
Since then, the rate of house price inflation has been remarkable. First-time buyers now have to fork out over £50,000 more than they did five years ago. Plus, many fear that house prices will continue to rise over the next few years given that they have seemingly defied gravity during the course of the pandemic.
Why are house prices still increasing?
Many will be surprised at yet more reports of rising house prices. That’s because the Stamp Duty holiday, often cited as the major cause of house price inflation, ended in September.
According to Robert Gardner, Nationwide’s chief economist, the recent rise in house prices has been mainly driven by demand.
He explains, “Demand for homes has remained strong despite the expiry of the Stamp Duty holiday at the end of September. Indeed, mortgage applications remained robust at 72,645 in September, more than 10% above the monthly average recorded in 2019.”
Despite this, Gardner did concede that activity may cool in the coming months as a result of the rising cost of living.
Is there hope for first-time buyers?
While first-time buyers are likely to wince at Nationwide’s latest House Price Index, there could be some hope if the Bank of England raises its base rate. The bank’s Monetary Policy Committee is due to meet on 4 November to decide whether to increase it.
Even if the BoE decides against raising its rate, many now believe it is simply a matter of time before its hand is forced. That’s because growing concerns about rising inflation are becoming more and more difficult for the bank to ignore.
Whenever the BoE’s base rate does rise, this will almost certainly have an impact on the wider mortgage market, leading to higher interest rates. This means that borrowers will be less able to access the capital they need to fund house purchases, which could apply the brakes to rising house prices.
Nationwide’s Robert Gardner echoes this sentiment: “Even if wider economic conditions continue to improve, rising interest rates may exert a cooling influence on the market, though the impact on existing borrowers is likely to be modest.”
It’s worth knowing that some banks are already preparing for interest rates to rise. According to Defaqto, the number of mortgages available offering rates of less than 1% has been slashed from 82 to 22 in the last week alone.
I’m a homeowner: should I remortgage now?
Many existing homeowners will be concerned about a rise in interest rates. That’s because a modest base rate rise of 0.4% could add roughly £1,000 to the annual cost of servicing a high loan-to-value mortgage on an average home.
For this reason, many consumer groups are now urging mortgage holders to look for remortgage deals ahead of any rate rise.
If that’s you, take a look at our top-rated mortgage deals for a list of options.
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About the author
Karl is a writer specialising in investing and personal finance content. He regularly contributes articles on savings, bank accounts, mortgages, and loans. He was previously a Personal Finance Writer for MoneySavingExpert.
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