House prices rise 8.8% according to the Nationwide as first time buyers are back in the market for properties.

Nationwide house price index has recorded a rise of 0.7% in the last month bringing the average cost of a home to £176,500.

According to the Council of Mortgage Lenders (CML) there were 73,700 first time buyers a 32% rise on the year before.

The CML has said that growth prospects in the housing market were very good especially with the second phase of the government’s Help to Buy scheme.

Mortgage lending remains low

Data from the Bank of England supports the CML figures and shows mortgage approvals for November are 70,758, up 33% from the year earlier.

However, the level of mortgage lending still remains below the normal market level averaging £240 billion a year.

In 2013 the level was only £176 billion and this compares to all time high of £362 billion in 2007 before dropping to £143 billion in 2009 during the first year of the financial crisis.

The current demand from first time buyers means average house prices are now 4.6 times average earnings according to the Nationwide. This is much higher than the average over 20-year of 3.6 times but lower than the 5.4 peak during 2007.

For home movers the gap between their current home and the next increases which means they need a larger mortgage with a higher loan to income.

Mortgage rates may rise

Bank interest rates were reduced to a 300-year low of 0.5% in early 2009 and it is likely there will be an increase as the UK economy recovers, although not until 2015 according to the monetary policy committee.

More than one million first time buyers have taken a mortgage in the past five years and have never experienced an interest rate rise.

For remortgage buyers at the end of your mortgage deal, avoid the lenders expensive variable rate and switch to a preferential rate to reduce your monthly repayment costs.

In addition the Funding for Lending Scheme (FLS) offering £80 billion of low cost loans has been ended for mortgage lending by the government which means mortgage rates are likely to increase from the current level of 1.5% to 2.5%.

Currently older equity release buyers can secure fixed rates of 5.9% upwards on a lifetime mortgage without any evidence of earnings and no repayments as the interest can roll-up over time.

Currently older equity release mortgage buyers can secure fixed rates of 5.9% upwards on a lifetime mortgage without any evidence of earnings and no repayments as the interest can roll-up over time.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to repay an interest only mortgage, pay for care at home or gift to a family member.

Learn more by using the property value tracker chart, mortgage monthly cost calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.

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