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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 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 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.

More borrowing

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’.

Low rates

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.

10 comments so far. Why not have your say?

Rob Walker

Oct 31, 2013 at 18:08

It seems the help-to-buy scheme has already panicked some dormant housebuyers into action. My house was for sale through the summer with around two viewings a week and one offer finally accepted just below the asking price in August. After being off the market for two months, that sale fell through. The first day it was back on the market (Sat 19th Oct) I had Twelve viewings and four offers over the same asking price. This was in Bristol, not London, so I suspect that other areas are enjoying the same sudden interest. As usual the newspapers won't pick this up for at least a month and then the headlines will be 'House prices soar!' etc. but I reckon the Rightmove figures could well be right.

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Roger Savage

Oct 31, 2013 at 19:58

"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."

Why is this garbage being promoted on so many news channels.

The increase in lending and increase in house sales is due to one thing and one thing alone - cheap credit. It's got NOTHING to do with rising consumer confidence.

It's exactly the same story with new car registrations.

Cheap credit led us close to disaster last time. The 'solutions' to the problems of the past are not only to repeat them, but fund future problems with taxpayers' money.

It's completely insane.

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Roger Savage

Oct 31, 2013 at 19:58

"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."

Why is this garbage being promoted on so many news channels.

The increase in lending and increase in house sales is due to one thing and one thing alone - cheap credit. It's got NOTHING to do with rising consumer confidence.

It's exactly the same story with new car registrations.

Cheap credit led us close to disaster last time. The 'solutions' to the problems of the past are not only to repeat them, but fund future problems with taxpayers' money.

It's completely insane.

report this

clive chafer

Oct 31, 2013 at 20:33

No point in saying much more. I agree 100% with Roger Savage. The whole thing is pure idiocy, blatant electioneering and harmful to the economy on any medium to long-term view. This is therefore yet another example of democracy not working for the greater good of our country.

Why rising house prices are always presented in the media as 'good news' is a mystery to me. They are BAD news for anyone who wishes to purchase a home simply as a place to live in and that is the slant which should be put on their stratospheric increase in value.

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Jonathan

Nov 01, 2013 at 01:24

It very much depends on the area of the country you are living in. In London it is definitely up, in some other parts of the country house prices are down even compared to last years prices. I'm sure help to buy will boost prices in most areas though wages have not risen with inflation so a lot of people are a lot worse off than they were even in compared to 2008 when house prices dropped.

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Christopher

Nov 01, 2013 at 17:59

We still have a way to go to get to something like a house price of three years income and a mortgage of 1/3 month's salary. Not a bad measure of affordability when we had that. And not going that way now.

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Geoffrey Ashby

Nov 01, 2013 at 21:55

I think we all would agree that the reason Houses were not selling was that prices had been driven up to levels unaffordable on prudent terms ie sensible multiple of true earnings and on a repayment type Mortgage. So how come Houses are now selling even over these over priced levels.

Well, one factor is the Deposit being reduced to 55 but the multip[le of earnings now being used is never mentioned - checking with my Bank it is - said to be between 4 and 5 times earnings - hopefully truthfully declared.

weight of money available determines prices so what has happened - I find that Mortgages are being granted for a term up to age 70 ie this lenghened term dramatically reduces monthly repayments and hence the continued spiral in prices. In addition cash buyers in perticular are buying on the basis of yield from renting out and the normal alternsatives make high prices/ small yields acceptable.

I suggest that Government has encouraged this scenario not just to create economic activity but also to get Builders and Banks off the hook for bad debts and enable provisions to be reduced. It merely means another artificial . What happens when / if Government takes away the 15% guarantee?l hike in prices

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Jonathan

Nov 01, 2013 at 22:27

If 4 times your salary won't pay for 80% of the house (the remaining 20% is 5% deposit and 15% from the BoE) you can always apply for a BTL mortgage and pretend you are going to rent it out but just live in it. This is what many estate agents are recommending at the moment and it might partly explain why there are so many houses being bought on a BTL basis.

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Rightcharlie1

Nov 04, 2013 at 05:17

Jonathan - good point! I had not considered that. I t may be a slightly higher interest rate, but it is a lot better than no mortgage at all!!!

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Jonathan

Nov 04, 2013 at 09:23

Rightcharlie1, It is also illegal

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