First-time buyer house prices hit record high

The average house purchased by a first-time buyer is now more expensive than ever with prices rising £5,000 in the last month alone.

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Figures from LSL found the average purchase price in January 2014 was £155,832, up on the £150,875 figure recorded in the previous month and 16.4% higher than the same point last year.
Despite the government's Help to Buy scheme aiming to help borrowers with small deposits onto the housing ladder the average loan-to-value also rose in the same period, reaching 82.3% in the first month of the year.
Compared to the start of last year the average first-time buyer deposit has risen more than £500 to reach £27,519. With real wages falling due to high inflation and stagnant pay, the average deposit represented 75.1% of a first-time buyer's income in January, up from 74.7% in the previous month.
David Newnes, director of estate agents Your Move and Reeds Rains, said the government must increase house building or the Help to Buy scheme will simply push house prices upwards.
"As first-time buyer house prices continue their upward climb, Help to Buy is needed more than ever to keep the market accessible to all. But the market needs more than that. Far more house-building must come hand-in-hand with higher LTV lending.
"More building will ensure Help to Buy doesn't become a permanent crutch to the market; we need to increase our stock of affordable homes and reduce the competition between buyers to ensure a sustainable recovery."
Separate figures from Hometrack found London and the South East dominated the first-time buyer market with 38% (28,100) of total transactions in the capital and surrounding counties.
In London the average deposit is now £64,160 By comparison, the average first-time buyer deposit was just £13,393 in Northern Ireland and just £13,814 in Wales.

65% of homeowners are not prepared for a rate rise in the next 2 years

The latest Legal & General Mortgage Mood survey reveals that two thirds of consumers (65%) are not financially preparing for an interest rate rise in the next two years.
At the same time, only 7% of those polled are considering re-mortgaging their home in the next 12 months. These findings form part of Legal & General’s latest Mortgage Mood survey, the quarterly study which looks at the attitude of homeowners across the UK on a range of mortgage related issues.

With speculation continuing as to when the base rate will rise, and many commentators suggesting it will be in 2015, lenders have already started to price in the change prior. These findings therefore suggest that borrowers may be missing an opportunity to secure a low interest rate.

Homeowners in the North West are the most financially prepared for an interest rate rise with 39% saying they are planning for one. In contrast, respondents in East Anglia are least prepared, with over three quarters (78%) saying they are not planning for an interest rate rise.

Further findings reveal that, of those who said they are considering to re-mortgaging their home, the most common reason is to reduce monthly repayments, with nearly a quarter choosing this explanation (18%). Only 9% cited financing home improvements and just 7% of homeowners said they were considering it to consolidate existing debts.

When asked whether they were considering re-mortgaging their home in the next 12 months, those in East Anglia were the most likely to do so, with 14% saying yes. Homeowners in the East Midlands are least likely to re-mortgage their home, with just 3% saying they are considering it.



Jeremy Duncombe, Director, at Legal & General Mortgage Club comments:
“It appears that borrowers have not yet woken up to the possibility of a rate rise. With rates likely to go up in the medium term, lenders are already starting to price in a change in base rate in advance. Therefore, the record low interest rates we have seen in recent times are not going to be around for long. By not preparing or re-mortgaging, homeowners might miss a good opportunity to secure a record low interest rate.”

Jeremy Duncombe, Director, at Legal & General Mortgage Club continues:
“It is also interesting to note that only a small proportion of people surveyed would re-mortgage in order to consolidate debt or to finance home improvements. Following the impact of the financial crisis, it seems fewer consumers are choosing to borrow against their housing equity to fund their spending. In line with this view, the level of housing equity withdrawal has seen a downward trend for the last few years in contrast to the boom years.”

Jeremy Duncombe, Director, at Legal & General Mortgage Club concludes:
“Although it is good to see borrowers exerting more caution, the reality is that there is only one way interest rates can go – and that is up. Now is the time for borrowers to consider their options. Speaking to a mortgage adviser is the best way to understand all the options available and to secure one of the good deals that are still around at the moment.”