9 June 2021

House prices and mortgage lending soar

With summer in full swing, it’s not just the weather that is hotting up. UK property prices rose 9.5 per cent in the year to May, with the average house now costing £261,743, according to Halifax. Annual house price inflation is at its strongest level in nearly seven years and the value of the average UK home has increased by more than £22,000 over the past 12 months.

Market activity has inevitably been bolstered by the government’s stamp duty break, with buyers looking to complete their purchases by 30 June, after which date, a phased return to the full rates kicks in. Lockdown restrictions have also enabled some buyers to save up larger deposits making bigger properties more affordable. Affordability and low mortgage rates have given buyers more purchase power, which is also contributing to soaring house prices. There is also greater demand for bigger properties with more space, to accommodate post-pandemic lifestyles, and the lack of supply is pushing values ever higher.

However, as is often the case when you talk about average national property prices and activity, the picture is not uniform, according to Halifax. House price growth in the south of England is lagging behind the rest of the country – in Greater London, for example, prices are 3.1 per cent higher than a year ago compared with 11.9 per cent in Wales, as buyers are prepared to go further in the search for more space and less need to be in the office every day. However, first-time buyers who believe this will make it easier to get on the property ladder in the south of England will still find that prices are significantly higher than in many other areas. Finding a deposit remains one of the biggest barriers to buying a home, which is why the government mortgage guarantee scheme and the return of lending at 95 per cent loan-to-value (LTV), is so important.

With the return of high LTV mortgages, and lenders keen to lend with plenty of cash to do so, it comes as no surprise to hear that mortgage lending is at its highest level since 2007, according to the Bank of England. The value of gross mortgage advances in the first quarter of the year was £83.3bn, 26.5 per cent higher than the same quarter last year. With borrowing so cheap, even those who perhaps don’t need to take out a mortgage can see the benefits of doing so. Fixed-rate mortgages are proving particularly popular, with two-year fixes available from less than 1 per cent and their five-year equivalents from sub-1.5 per cent. This really is excellent value for short to medium-term security but of course borrowers should be wary of fixing for longer than they are absolutely sure about or may face early repayment charges.

With the property and mortgage markets busy, finding the right deal, and perhaps a lender who can move quickly in order to enable you to progress your purchase, may not be straightforward. This is where a mortgage broker such as SPF Private Clients can help, steering you through the array of choice available to ensure you get the most suitable and cost-effective deal for your circumstances.

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