According to the Nationwide average house prices have increased by 9.4% in the last year and are not slowing down.

For the month house prices are 0.6% higher and the 14 consecutive monthly rise with the average house price now at £177,846.

The new average house price is the highest since April 2008 before the financial crisis depressed the housing market helped by more first time buyers.

One million first time buyers

Since interest fell to 0.5% in March 2009 there have been one million new first time buyers although the number of new properties built declined over this period.

In England only 109,500 new homes were built in 2013 which was 38% below the level during the 2007 housing boom. This figure is half the numbers that need to be built to meet future demand.

The rise in prices is not the only difficulty for first time buyers. Interest rates are expected to rise from the current 0.5% level to 2.5%. This will be the first time the newest one million first time buyers have experienced a rise in mortgage costs.

For remortgage buyers currently on their lenders standard variable rate, switching to a new mortgage deal would help them to reduce the cost of monthly repayments.

Mortgage cost set to rise

The Bank of England has warned interest rate are likely to rise next year. An increase of 2.0% would mean mortgage costs based on the average house price would increase by £230 per month.

A sustainable level of mortgage repayments should be about 35% of take home pay a rise in interest rates could double the number of people above this level.

The equity release mortgage buyer can secure fixed rates typically from 5.9% upwards without any evidence of earnings, which is important for borrowers with only pension income and no need to make monthly repayments.

The availability of mortgages requiring lower deposits of 5% are allowing first time buyers and existing home movers to stretch their borrowing to buy their homes after the recent price rises.

This has been fuelled by the government’s Help to Buy scheme which allows people to place a 5% deposit with a 15% guaranteed to the lender interest free and the balance as a mortgage.

As a result the number of 5% mortgages has increased from 43 to 132 since the scheme was launched in October last year.

Help with the deposit for a first time buyer and home mover can come from family members as the equity release buyer can access cash using a lifetime mortgage to gift to children and grandchildren.

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 to consolidate debt, home improvements or gifting to a family member.

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.

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

Use your dashboard to access online mortgage quotes, money off vouchers and start your mortgage application online 24/7 on desktop, tablet or smartphone.