House prices are higher by 6.7% over the year and out of reach for many as London and the East are leading the regions.
The latest data from the Office of National Statistics (ONS) shows average house prices were 6.7% or £18,000 higher over the year to December 2015.
This is much higher than the increase in wages making it difficult for first time buyers to afford to buy with average house prices at £288,000.
The rate of house price growth is less than the 12.1% recorded in September 2014 as house prices have increased from £252,000 in January 2014 and £270,000 a year later.
The continued rise in house prices for first time buyers over the last two years means they would need higher earnings or a larger deposit to purchase their first home.
Prices in the east rising fastest
House prices in the East of England are rising at the fastest rate of 9.7% followed by London with 9.4% and this compares to 7.3% rise for England where average house prices are £301,000.
For new purchases buy-to-let landlords would require a larger deposit and mortgage to buy and higher rental income to cover the interest costs.
Across the country the ONS figures of average property prices and annual changes for December 2015 are as follows:
| Area | Annual Changes | Property Values |
|---|---|---|
| London | 9.4% | £536,000 |
| South East | 8.8% | £365,000 |
| East | 9.7% | £315,000 |
| England | 7.3% | £301,000 |
| UK | 6.7% | £288,000 |
| South West | 4.7% | £261,000 |
| West Midlands | 3.5% | £207,000 |
| East Midlands | 5.0% | £198,000 |
| Scoltand | -0.2% | £193,000 |
| Yorks and the Humber | 2.6% | £183,000 |
| North West | 3.7% | £182,000 |
| Wales | 1.0% | £175,000 |
| North East | 0.9% | £155,000 |
| Northern Ireland | 1.5% | £148,000 |
Average house prices in the East of England are now £315,000 with London leading the country with average prices of £536,000 and house prices in England are now 20% higher than before the financial crisis.
Higher property values for older homeowners allows the equity release mortgage buyer to access money and maintain their lifestyle or consolidate debt.
This is in contrast to Scotland where prices are 1.7% below June 2008 and Northern Ireland where property prices are 44.6% below levels reached in 2007.
The rise in house prices can make buying a new home harder for home movers as the gap between their current home and the next increases which means they need a larger mortgage.
However, for remortgage buyers the higher prices can allow them to release capital which they can use to improve their home, such as adding an extension or new kitchen and bathroom which can increase the property value.
House prices likely to rise further
The ONS have said there has been a strong rise in house prices starting in early 2012 with growth of 23.3% to December 2015.
Even so prices reduced by 0.2% between November and December 2015, ending 7 months of consecutive increases.
There remains upward pressure in the housing market due to a shortage of supply of housing stock and strong demand.
The lack of availability of homes in the market is constraining growth and supporting price increases. There has also been a fall in output of new-build homes reducing by 1.8% in the year to November 2015.
For first time buyers the lack of supply of existing and new build properties has seen house prices increase by 6.4% over the year which is a slightly slower rate than the 7.5% to November.
The average house price paid by first time buyers is £219,000.
For owner-occupiers such as home movers, property prices have increased by 6.9% over the year to December 2015 compared to 7.8% higher for the previous month. The average house price paid by first time buyers is £335,000.
What are your next steps?
Talk to our London City Mortgage advisers if you are an older homeowner releasing equity from your property, we can recommend the lifetime mortgage to access wealth for home improvements, holidays and even buying a moe expensive home.
Learn more by using the equity release calculator, property value tracker chart and mortgage monthly cost calculator. Start with a free mortgage quote or call us and we can take your details.
At LCM our mortgage brokers can provide advice if you are a first time buyer, moving home, want to remortgage your existing home to a new cost effective mortgage deal or are a buy-to-let investor.
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