The average price of a UK home last month has increased by the biggest margin for ten years according to the Halifax.

Data from the Halifax, the largest mortgage lender, shows that the average property in the UK has increased by £6,816 or 3.9% to £184,464. The last time property increased at this rate was 4.2% in October 2002.

Over a year their figures show prices are higher by 8.7% in May compared to 8.5% in April.

The continued rise in house prices means first time buyers would require a higher deposit, larger mortgage or higher earnings to purchase their first home.

The Halifax Index is based on their mortgage approvals and exclude cash sales and despite the rise prices are still £15,000 below their all time high level in 2007.

Demand remains strong

Figures from the Nationwide confirm the market is strong saying average prices are now at an all time high of £186,512 or 11.1% higher year-on-year.

House prices in these towns are likely to rise to the benefit of existing homeowners such as remortgage buyers giving them an opportunity to release capital which they can use to improve their home such as adding an extension or new kitchen.

For older homeowners the considerable value in their property allows the equity release mortgage buyer to access money from their homes to improve their quality of life or help your children start or expand a business.

The single month figure from the Halifax of 3.9% was unexpected and a one off as the quarterly month on month data shows an increase of 2%.

Research from property firm Knight Frank shows prices of luxury homes in London are up by 7.5% helped with money from international investors looking for safe havens. The largest number of buyers were from China, then Russia and Singapore.

After a review of fourteen cities in Europe, Knight Frank found that the cost of luxury property in London is second only to Monaco.

New borrowing limits introduced

To counter the recent house price rises new borrowing limits of a maximum of four times income have been introduced by the Royal Bank of Scotland and Lloyds Bank for mortgages of £500,000 or more.

This compares to the long term average of 4.1 times and the all time high of 5.8 reached in April 2007.

This follows tougher mortgage lending rules introduced in April by the Mortgage Market Review (MMR) where lenders must check that first time buyers, home movers and switching remortgage buyers can afford the mortgage.

These affordability checks take into account a homebuyers income and outgoings such as child care, holidays and living costs. Mortgage lenders must also apply a ‘stress test’ for affordability to ensure that borrowers can afford the mortgage repayments.

This does not apply to buy-to-let landlords as they must have a 25% deposit and show the rental income can exceed 125% of the mortgage interest.

What are your next steps?

Call our LCM mortgage brokers if you are a buy-to-let landlord with a property, remortgaging and want the best mortgage deal, buying your first home or you are planning to move home.

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

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your home to spend on anything such as pay for care at home or even buy a more expensive home.

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