Halifax is predicting another year of growth in 2014 but there is no evidence this will lead to a housing bubble.

The leading UK mortgage lender the Halifax predicts house prices will rise by between 4% and 8% next year and the average UK house price at the end of November is now £174,910.

House prices have already increased by 7% in 2013 although the Halifax does not expect a further rise to result in a housing bubble.

Higher property values for older homeowners allows the equity release mortgage buyer to access cash to consolidate debt, for home and garden improvements, holidays gift to a family member or friend.

Prices below peak levels

Despite the gains in house prices they remain 12% below the highest levels achieved before the financial crisis peak of August 2007 according to Halifax's chief economist, Martin Ellis.

They are also lower on earnings multiples with the average price currently 4.8 times annual earnings compared to 5.8 times in 2007.

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 and higher earning multiples.

There is no sign of home buyers being excessive behaviour which is associated with a housing bubble.

According to martin Ellis, current prices rises continuing next year would not create a bubble when compared to double digit rises between 2001 and 2004 and 150% rise in prices over eight years leading to the 2007 peak.

Factors driving house prices

There are a number of factors contributing to the unexpected rise in prices says Halifax.

Currently home buyer confidence is high due to the increasing evidence of an economic recovery. This is stimulating demand for houses and the mortgage market.

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

Low interest rates and government schemes such as Funding for Lending and Help to Buy are attracting first time buyers back to the market increasing demand.

Finally a shortage of houses is pushing up prices at a faster rate than expected.

The lack of new homes could mean remortgage buyers staying in their current property and increasing their mortgage to releasing capital which they can use to improve their home.

What are your next steps?
Speak to our LCM mortgage advisers if you are planning to move home, buying your first home, remortgaging your existing home to a new cost effective mortgage deal or are a buy-to-let investor.

For equity release buyers our London City Mortgage brokers can recommend lifetime mortgages allowing you to receive cash from your property to help maintain your standard of living as costs rise or reduce inheritance tax owed by your beneficiaries.

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

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