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House Prices Soar at Fastest Rate in Four Years

10 October 2020

house prices

House prices in September 2020 rose by an annual 5%, according to figures from Nationwide’s House Price Index. That’s the highest rate seen since 2016.

The average price for UK homes now stands at £226,129. The month-on-month rise has been 0.9%. Mortgage approvals for buying houses increased from 66,000 in July to almost 85,000 in August – this is the highest number since 2007.

The Stamp Duty holiday has given prices a boost and motivated people to re-evaluate where they want to live, particularly with so many people now working from home.

Nationwide’s chief economist Robert Gardner said a “number of factors” are behind the rebound. One of the primary factors he noted was “pent-up demand”, as people who made the decision to move before lockdown started are now acting on that decision. He also noted that the stamp duty holiday is “bringing purchases forward” as people want to take advantage of the savings while they’re available. Finally, he noted that “behavioural shifts” are playing a part, with people re-evaluating their housing preferences after having gone through lockdown.

More movers than first-time buyers

With house prices rising rapidly, the challenge for first-time buyers is becoming even greater. Many lenders have either reduced or withdrawn the number of mortgages they offer for buyers who only have a small deposit. In the current climate, movers are more likely to be purchasing homes than first-time buyers, as indicated by research from property website Zoopla. They predict that the gap between mortgaged homeowner activity and first-time buyer activity will widen over the next 12 months.

Zoopla’s research and insight director, Richard Donnell, cited a shift in “the mix of buyers” as promoting market conditions with “sustained demand from equity-rich homeowners” who are looking for a change in location and more space. Conversely, demand from first-time buyers is weakening, despite them having been a “driving force” for property sales over the last 10 years. With “lower availability of higher loan-to-value mortgages” the mix of buyers is shifting into 2021.

Though the number of mortgages aimed at first-time buyers has dropped in recent months, there are still options out there for buyers who only have a 10% deposit. However, choice is much more limited than it has been over the last few years and products come and go quickly. People with a larger deposit are likely to have a broader choice of rates and available lenders, so first-time buyers are advised to consult a mortgage broker to find the best deals.

Written By

Dave Relfe MCSI DipPFS CertSMP

Dave is the principal mortgage and protection adviser at Think Plutus. He has more than 15 years of experience in financial services and holds the Diploma in Financial Planning from PFS, Investment Advice Diploma from CISI, and the Certificate in Advanced Mortgage Advice from the Society of Mortgage Professionals. He has devised the unique Think Plutus approach that has helped many clients, from first-time buyers to buy-to-let investors and property developers, to people looking to remortgage or release equity from their property. Connect with Dave on LinkedIn.

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