With house price inflation in the UK continuing to rise, more and more people are choosing to explore the options open to them. Before dramatic increases occur, first-time buyers can look to take advantage early on, while those looking for buy-to-rent properties can expand their portfolio rapidly.
Prices in the year to June rose by 3.1%, up from 2.9% in May, according to the Office for National Statistics, a sign that more and more of us see now as the perfect time to invest.
London still at the centre of rises
Every region of the UK saw prices increase, although the highest rates were experienced across the capital and in the surrounding areas. Overall, there was a 3.3% rise on average in England, while Wales fared even better, with a rise of 4.3% on average across the country. Home buyer activity is increasing at its fastest rates in areas where numbers have dropped most in recent years, suggesting a surge in the property market.
Rates of this size were last seen in November 2006, while most activity is occurring in the West Midlands and the North West according to the Royal Institution of Chartered Surveyors. One reason for this could be apportioned to the introduction of the Help to Buy scheme, which launched in April of this year.
Under it, buyers of new-build homes need to put down a 5% deposit and can then take out a government loan for up to 20% of the property. Since its introduction there have been more than 10,000 people registering on to the scheme who are considering a property that falls below the £600,000 threshold for eligibility.
The only restriction is that it can only be used if the person involved intends to use it as a permanent residence – they cannot take advantage of it and then rent it out, for example.
From January next year, it will be extended to help buyers of existing homes, with the government guaranteeing a portion of the loan in a bid to give banks more confidence to lend.
As the economy stands, a lot of mortgages represent a risk to the banks involved, although it is hoped the latest amendments will change that. Furthermore, it is likely that an ever increasing number of individuals will look to use the scheme and take advantage of it in the near future. The Funding for Lending scheme, launched in the summer of 2012 also helped to give more accessibility to the property market. With support from the government, the Bank of England is able to allow banks and building societies to borrow at cheaper than market rates for a period of up to four years.
As a result, lending to businesses increases and the rates are lower while there is greater access to credit which can help those looking for property. When it comes to setting up a mortgage, falling rates make repayments cheaper, but the loan rates on property are rising slowly, suggesting that now is the time to jump in.
Changes to market conditions
On average, a loan is now 83.6% of the value of the property, while it was down at 81.6% a year ago. Therefore there could be a window of opportunity for many potential buyers and the recent announcements that interest rates are likely to remain low will only assist the situation. If, as expected, the rates do remain low, the number of cheaper mortgages available is likely to increase, which should encourage more people to buy.
House hunters have hit their highest level for three-and-a-half years, while the fact many people need to find just 10% of the property value to set up a mortgage represents a cauldron of opportunity. While credit card and loan payments might reduce the amounts that can be borrowed, those without existing monetary issues are in a prime position to buy.
However, it is not all plain sailing though, as many estate agents are still reporting stand-offs between sellers and buyers. This occurs because buyers are not prepared to pay over the odds for properties, while sellers are reluctant to cut their prices and take less than the real value of the building.
Those looking to invest should therefore think carefully before doing so. But with the market as it currently is, there are plenty of opportunities for people to climb the property ladder, should they so wish.