House prices were up 6.8% in January since a year earlier after a lost decade of building leaves the UK with a significant shortfall in homes.

A decade ago the government commissioned a report recommending 210,000 new-build homes annually are needed to meet the demand and keep price inflation at 1.8%.

For price inflation of 1.1% this figure increases to 260,000 new homes and yet only 115,000 were built. The lack of lending during the financial crisis added to the lower levels of building.

The lack of building has driven house prices higher by 7.1% in England, 6.9% in Wales, 1.4% in Scotland, 2.7% in Northern Ireland and 13.2% in London over the last year.

For remortgage buyers higher prices give them an opportunity to release capital which they can use to improve their home.

First time buyers benefit

The government’s Help to Buy scheme has boosted the number of first time buyers to the highest levels since 2008 with the average house price has increased by 7.6% to £190,000.

Help for first time buyers can come from family members as the equity release buyer can access wealth using a lifetime mortgage and gift the deposit to children or grandchildren.

According to the Council of Mortgage Lenders (CML), 21,800 loans worth £3.1 billion were advanced to first time buyers in January, 38% more than a year earlier.

The Office of National Statistics (ONS) shows the average house price is now £254,000 whereas for home movers the average price has increased by 6.5% to £291,000.

Confidence in the building industry has improved with the Help to Buy scheme and this has seen construction increase considerably.

Help to Buy extended

In the Budget the Chancellor George Osborne extended the Help to Buy scheme until the end of the decade which will help new-build homes, especially popular with first time buyers.

Phase two of the Help to Buy scheme was launched last year with a 15% guarantee from the government to the lenders which is interest free to the borrower.

Only a 5% deposit is required by the home buyer on all properties up to £600,000 with the balance provided by a mortgage from a lender.

The scheme promotes new homeownership for people that are renting and is not available to switching remortgage buyers or buy-to-let investors.

What are your next steps?

Talk to our London City Mortgage advisers if you are an older homeowner releasing equity from your property, we can recommend the lifetime mortgage to access wealth to consolidate debt, home improvements or gifting to a family member.

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

At LCM our mortgage brokers can provide advice if you are a first time buyer, moving home, want to remortgage your existing home to a new cost effective mortgage deal or are a buy-to-let investor.

Use your dashboard to access online mortgage quotes, money off vouchers and start your mortgage application online 24/7 on desktop, tablet or smartphone.