House prices increases: the winners and losers

The latest figures have revealed that house prices are on the rise – at the fastest rate since 2010.

The average home now costs £170,231, up by 5.4% from £160,292, according to the Halifax monthly index. The Office of National Statistics (ONS) also published statistics showing that prices in the year to June went up by 3.1%.

There is an air of confidence around the housing market at the moment, especially as it seems that Britain is finally on its way to recovery. The annual economic growth forecast was recently increased to 1.5%, from 0.8%.

With negative equity finally moving out of the way, banks and building societies are more likely to lend, despite rates still at an all-time low.

It’s good news for first-time buyers too, as the current situation will help them make it on to the first rung of the ladder. The Royal Institution of Chartered Surveyors revealed that this marks the highest number of new buyers since recording began.

The beginning of the housing market recovery is thought to be down to increased consumer confidence and government funding schemes, such as Help to Buy and Funding for Lending.

However, with the word recovery being bandied around, few people are considering those now facing an uphill battle.


First-time buyers

More than 26,000 first-time buyers took out mortgages in July – a 45% increase on the same period last year and the highest figure for six years, according the First Time Buyer Monitor.

David Newnes, director at LSL, said: “Mortgages are much more affordable for first-time buyers compared to last year, which has opened the door to thousands of would-be buyers who were shut out of the market.”

Negative equity

Some homeowners have been struggling with low house prices for a number of years – some have even fallen into negative equity. This is where the value of the property is less than the outstanding mortgage.

In this case, moving home has been almost impossible. However, the recent increases may pull more people out of negative equity and give them the chance to sell and move up the ladder.


The demand on the rental market has been like nothing ever seen before, with rent soaring to new heights. As people have not been able to afford their own homes, more have been turning to rental properties.
Tenants that are having their incomes squeezed by increased rent may start to see the benefit as more people move into their own homes. Also, with more people able to get buy-to-let mortgages, there’s a chance there will be increased competition.


Low incomes

Efforts to give the property market a boost have certainly worked, with the Bank of England’s Funding for Lending scheme making around £80 billion available for loans – mostly mortgages.

Help to Buy, which lends 20% of the value to buyers of new builds, interest-free for five years, has also had a positive impact. The scheme has been so successful that it is being expanded to buyers of other properties in 2014.

However, there are concerns. Some are worried that the lending schemes give consumers access to cheap credit – one of the main causes of the 2008 credit crunch.

Bank of England base rates are currently still at an all-time low of 0.5%, but when they do go up, the bubble could burst and house prices plummet all over again.

Howard Archer, chief UK economist at IHS, said: “Policymakers must be prepared to quickly pull the plug on the Help to Buy mortgage guarantee scheme at the first sign of any housing price bubble developing,”

Everyone else

Talk of a housing bubble has been denied by the Bank of England, with chief economist, Spencer Dale, saying: “It’s [Government funding] done its job in terms of encouraging new house-building, but the idea that it is somehow fuelling a housing boom doesn’t stack up in terms of the numbers.”

Mortgage lenders also had their two cents on the matter, as the Council of Mortgage Lenders warned that while the housing market seemed to be picking up, it was far too early to be talking of a ‘boom’.

However, should house prices continue to increase as has been forecasted, there is every opportunity that the bubble will burst. In the event that more people are plunged into negative equity and with unmanageable debts – history may just repeat itself.

Posted by: Jessica Odell Categories: Buying, Estate Agents, Selling Tags: , , 3 Comments

3 Responses to House prices increases: the winners and losers

  1. avatar Bill says:

    please could you explain the maths, as 5.4% increase on £160,292 seems to come to £168,948 not the £170,231 quoted?

  2. avatar DC says:

    There maybe a boom forming in London but lets be frank, most of the rest of the UK is unchanged for a number of years, with some areas in decline so why all the damaging hype from you reporters?? Most property values are still worth no more than they were in 2005/6 so how can you call this the start of a boom.
    As for rental prices, some areas are charging the same prices that they were in 2009/10 and many landlords are experiencing voids between tenants.
    The other thing is that the Halifax average prices differ greatly from those of the Nationwide, Rightmove and the Land Registry to name a few and none of them are the same as each other either.
    Take London out of the equation and most of the UK is still in a big slump so please get your facts right and tell us the whole truth!

  3. avatar Martin in Birmingham says:

    So where will this leave investors? Is property investment still a good move, or will it lead to negative equity and end up costing rather than making a profit?