Mortgage lender Halifax reports a 2.4% rise in house prices for February with pressure on the government to cancel Help to Buy scheme.

House prices are now 7.9% higher than a year ago, the highest since October 2007, sending the average price of a UK home up to £179,872 although the figure for London is more than twice this amount at £409,881.

House prices in London are likely to rise further and benefit existing homeowners such as remortgage buyers as this give them an opportunity to release capital which they can use to improve their home.

This is due to a significant increase in transactions over the last year following improved economic data, consumer confidence and cheaper mortgage deals brought on by the Help to Buy scheme.

Help to Buy inflating prices

The second phase of the Help to Buy scheme was launched last year and is popular with first time buyers with 89% of properties.

Help to Buy requires home buyers to have only a 5% deposit and under the scheme the government will guarantee the lender 15% of the property value. Property prices can be up to £600,000 although the buyer must have a mortgage of 95% from a participating lender.

Critics of  the government scheme have said it is artificially inflating house prices with greater inflation in London and the south-east.

There is also continued pressure on household finances with falling earnings and consumer price inflation making it harder for first time buyers to afford a new home, even with Help to Buy.

Home movers wanting to trade up when prices are rising will find their next property is more expensive which means they need a larger deposit or mortgage.

Halifax sales increasing

Halifax has said that the number of UK house sales have increased for the ninth month in a row and mortgage lending is up 42% on a year ago.

The data from the Halifax does not include cash purchases and is based only on their own data for their mortgage lending. This creates different figures when compared to the Land Registry that also includes homes bought with cash.

For older homeowners there is higher activity with equity release mortgage buyers able to stay in their homes while accessing wealth in their property for home improvements, holidays or even gift a child or grandchild the deposit on their first home.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.

Learn more by using the property value tracker chart, mortgage cost calculator and equity release mortgage calculator. Start with a free mortgage quote or call us and we can take your details.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to repay an interest only mortgage or reduce inheritance tax owed by your beneficiaries.

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