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House prices continue to rise

Ryan Fowler

January 29, 2014

Housing transactions increased by 103,000 in December, 30% higher than 12 months before.

Robert Gardner, Nationwide’s chief economist, said: “The housing market is continuing to gather momentum on the back of further solid gains in employment, record low mortgage rates and rising confidence.”

In the third quarter of 2013 first timers were up 32% compared with the same period in 2012, accounting for around 44% of activity. The typical first time buyer puts down a 20% deposit.

First timer homes cost 4.6 times average earnings, below the peak of 5.4 in 2007 but above the 20 year average of 3.6 times earnings.

Gardner added: “First-time buyers are the lifeblood of the housing market. As well as accounting for a significant proportion of housing transactions (historically around 40% of transactions involving a mortgage), they also play an important role in the wider market, for example in helping to complete chains, enabling those that already own a property to move.”

He attributed the increase to a resurgence in the labour market which created 280,000 new jobs in the three months to November, calling it the most decisive factor in achieving a sustained increase in first-time buyer numbers.

There was also a trend towards borrowers lengthening mortgage terms, with 52% of mortgages currently running over 25 years, up from 40% in 2007.

Figures also revealed a further drop in interest-only rate mortgages, accounting for just 2% of new lending to first-time buyers in November, down from its peak of 37% in September 2007.

Gardner said: “While we do not expect interest rates to rise until mid-2015, borrowers should be prepared for the prospect of interest rates increasing back towards more normal levels.”

More than a million first-time buyers have now entered the market since the Bank Rate was cut to a 300 year low in early 2009.


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