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House price rise: what should you believe?
House prices appear to be moving relentlessly higher – even if some of the data is not quite what it seems.
by Michelle McGagh on Oct 31, 2013 at 16:36
House prices appear to be moving relentlessly higher – even if some of the data is not quite what it seems from the sensationalist headlines.Figures from Nationwide building society show house prices were 5.8% higher in October than a year ago with the average price of a home standing at £173,678.
Although the average property price has risen 1% in the past month, we are still 7% below the peak of the housing market in 2007.
Nationwide’s figures are broadly in line with those reported by the Land Registry, which show house prices have gained 1.5% since August with an average house in England and Wales costing £167,063. These figures are typically the most reliable as they are collated from completed house sales.
This is in contrast to the Rightmove data, which shows house prices increased 2.8% in England and Wales in October with the average property coming in at £252,418.
Rightmove also claims London saw a 10% rise in property prices in October, making the typical asking price of a London pad £544,232.
However, while these figures make great headlines, the numbers are based on asking prices on the Rightmove website and not on final sale values.
Despite the disparity in the house price figures, the government’s Help to Buy scheme is undeniably boosting mortgage lending.
The second part of the scheme, brought forward from January 2014, sees the government guaranteeing 95% mortgages and the banks signed up to the scheme have been quick to lend.
Lloyds announced that it had already delivered on its commitment to lend to 60,000 first-time buyers by the end of the year. It has loaned £6.5 billion this year, exceeding its target three months early.
It is also on track to provide one in four of all new mortgages to first-time buyers this year.
Several building societies have signed up to Help to Buy so a 50% surge in mortgage lending from the mutual sector is unsurprising. Some £3.7 billion was loaned in the first nine months of the year compared with £2.5 billion last year.
Around one in three loans made by mutuals were to first-time buyers.
Adrian Coles, director general of the Building Societies Association, said: ‘What has changed and is the main factor driving this year-on-year lending increase, is a palpable improvement in consumer confidence.’
He added that Help to Buy had had ‘a positive effect…on the behaviour of existing and aspiring homeowners’.
Nationwide chief economist Robert Gardner said the housing market appeared to be ‘following the more resilient upward trend evident in the wider economy in recent quarters’ and ‘the ability and willingness of potential buyers to transact has been steadily increasing’.
He also noted that mortgage rates are at an all-time low and that, combined with the Help to Buy and Funding for Lending schemes, make homeownership more affordable.
For those wishing to take advantage of the government guarantee on 95% loans, up to a maximum £600,000, the rates are higher than those with a larger deposit but are slowly becoming more competitive.
According to Moneyfacts.co.uk, Furness building society offers the best rate under the scheme, at 4.75% fixed for five years with no arrangement fees.
Hanley Economic building society comes in second place with a 4.89% rate fixed for two years with an arrangement fee of £250 while NatWest offers a three-year fixed deal at 4.99% with no arrangement fee.
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