For first-time-buyers and those wanting to move up the housing ladder it’s a bit of a nightmare. With rising house prices across the country, it’s proving tough for those looking to get on with their lives. The problem is that common sense warns against borrowing too much. After all, interest rates can only go one way – and that’s up! Whatever happens, borrowing in the medium to long-term is likely to rise. This is why many buyers are keen to buy – and fast – while it’s cheaper as it’s pretty obvious that house prices will rise in 2014.
So it’s an inevitable dilemma for many interested in buying a house in the UK.
For hotspots in London and the South East, today’s growth comes at the expense of higher rates and more modest expectations further down the line. With the Bank of England Governor, Mark Carney, predicting they’ll rise in three years or so, this can be factored in to further forecasts. This is giving many people greater confidence to buy a house. The problem is, with Help-to-Buy and other government policies, it’s being argued that prices could rise too high and too fast, with those who’ve borrowed heavily most at risk.
Figures show that since the first stage of the scheme (which offers state-backed mortgages to people with deposits as low as five percent) launched in April, 10,000 people have signed up to receive a 20 per cent equity loan, interest-free for five years, helping them buy a new-build home worth up to £600,000. Royal Bank of Scotland, NatWest, Halifax and Bank of Scotland starting offering loans under the initiative last week and strong interest has been registered, with more lenders, such as HSBC and Barclays, confirming they’ll also come on board. Fears have been expressed that the move will create a property bubble, pushing demand up for homes when instead building new homes could be a better move.
So with all this activity going on, what is the average house price in the UK at the moment? Well, The Centre for Economics and Business Research (CEBR) claims prices will hit £225,000 this year, with a 3.9 percent jump due in 2014. By the end of next year, it’s predicted that an average home will be worth £266,708. And with figures from the Council of Mortgage Lenders showing that the taking up of fixed-rate mortgages are running at record levels it seems that buying a home it still considered a pretty safe investment in today’s economic climate. Even originally slow growth areas such as the Midlands and the North East have experienced big increases in buyer activity over summer.
While property’s still inevitably a great long-term and short-term investment, it’s unclear how to judge the climate in the medium term. When will interest rates go up? By how much are prices going to rise in 2014, 15, 16 and beyond? Will it make a difference as to who gets in government (if Ed Miliband gets into power it’s likely he’ll introduce mansion tax and maybe heavier taxes on buy-to-let properties – potentially pushing prices down, for example). It’s a tough call, but one thing’s for sure – Britain’s love affair with property is far from over.
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