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  • UK house prices see biggest monthly rise for 17 years in April, Nationwide reports

UK house prices see biggest monthly rise for 17 years in April, Nationwide reports

House prices continue to storm upwards rising monthly by 2.1% and annually by 7.1% to an average of £238,831 for April, according to the latest Nationwide house price index. The growth has largely been fuelled by the extended stamp duty holiday and the UK’s continued recovery from the coronavirus pandemic.
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The average cost of a new home is now £15,916 more than a year ago, rising to £238,831 in April, according to Nationwide’s latest house price index.

This is a rise of 7.1% over the past year and a monthly increase of 2.1%, the biggest monthly increase seen since February 2004, following a slight fall of 0.3% between February and March. 

The data, taken from the building society’s mortgage approvals, means that even if house prices remain flat for the next two months, annual growth will reach double digits by June.

The extension of the stamp duty holiday has been a major factor in the rise combined with a strong economic recovery, the successful coronavirus vaccine rollout, and a change to the way we work which has seen a huge rise in demand for new homes.

The range of support packages from the government, including the furlough scheme and the launch of mortgages requiring just a 5% deposit have also helped.

Experts are predicting growth to continue until the end of the summer but say it could then begin to slow down as the furlough scheme ends and the impact of the pandemic starts to be felt more widely.  

Nationwide’s chief economist Robert Gardner said: “Just as expectations of the end of the stamp duty holiday led to a slowdown in house price growth in March, so the extension of the stamp duty holiday in the Budget prompted a reacceleration in April.

“However, our research suggests that while the stamp duty holiday is impacting the timing of housing transactions, for most people it is not the key motivating factor prompting them to move in the first place. 

“For example, amongst homeowners surveyed at the end of April that were either moving home or considering a move, three quarters said this would have been the case even if the stamp duty holiday had not been extended.”

Cheapest regions in the UK to buy a home

Why are house prices so high?

There are a number of factors in play when looking at the rate of house price growth.

The stamp duty holiday, which was introduced last summer as a temporary measure to help boost the housing market has certainly played a big part.

It means those buying a new home pay no stamp duty on the first £500,000, saving anyone buying a house over this limit £15,000.

The holiday was due to end in April but the Chancellor Rishi Sunak announced an extension to the end of June in his March budget. In July it will be reduced to £250,000 and from October it will return to its normal rate of £125,000.

The government’s extension of the furlough scheme, which has provided support to those at risk of losing their jobs because of the pandemic, has also propped up the economy and in turn the housing market over the past year seeing fewer people forced to sell up.

In lockdown many people who have been able to keep their jobs have also managed to save money. In fact it’s predicted that around six million people have managed to save thousands in lockdown by the consultancy firm LCP. 

The pandemic has also changed the way we work. Millions of office workers have been working from home since March 2020 and have not had to commute into a city office every day. Many of those are now looking for larger homes to live in which are often not affordable when living in a city.

How have house prices changed in the past year?

Prices have continued to rise since the housing market reopened following its total shutdown last March.

There are several housing indices released on a regular basis and while they all measure different things, they have all shown this continual rise over the past 12 months.  

Lucy Pendleton, property expert at estate agents James Pendleton, comments: 

“This market is on the boil. Rarely does a new record high leave such clear water between it and the previous peak. Last month’s average house price of just over £232,000 was itself a record and April’s new high of nearly £239,000 tells you just how buoyant things are at the moment. That’s a staggering jump of more than £6,000.

“Buyers are now signalling that they know they stand halfway between lockdown and freedom, and are chasing prices as they sense the crisis ending. Activity is incomparable to January’s slow start in lockdown and silly season might be just around the corner. That’s when a seller’s market becomes entrenched against a backdrop of very high demand and you start to see open houses for properties that are nothing special and a return of gazumping.”

Who’s offering 95% mortgages - and what are they charging

What help is available for home buyers?

Along with the stamp duty extension, another new government measure saw an increase in the number of 95% loan to value (LTV) mortgages available. 

These were first announced in the last Budget and started appearing last week. They are aimed at first-time buyers, but are available to anyone buying their main residential home, and come with extra support from the government.

A number of these mortgages have also been launched outside of the scheme, opening up the options for those with small deposits.

It’s worth noting that 95% mortgages tend to cost more - with people able to find a 20% deposit paying roughly half the interest.

The draw with these mortgages is the small deposit needed, of just 5%. Saving for a deposit is one of the biggest barriers to buying a new home and Nationwide says a 10% deposit for the average first-time buyer is around £19,500.

Data from the building society shows that household deposits increased to £196 billion in the 12 months to February 2021, which is around £7,000 per household, as a result of people being able to save more money while in lockdown.

However, it says that the majority of savings created in the past year have been by older and wealthier households and not by potential first-time buyers. 

April’s best mortgage rates by loan-to-value rate

What’s next for house prices?

The last year has shown that nothing is certain and at any point the whole world can change. This could be through a new variant of coronavirus and yet more lockdowns or even a new virus entirely.

However, for the moment experts are predicting that house prices will continue to surge until the end of the summer.

This is the point when things may change as the government’s furlough scheme comes to an end and stamp duty returns to its normal level. 

By this time it’s thought unemployment numbers could also rise which will have a knock-on impact on how many people are then able to buy a new home. However, Nationwide remains cautiously optimistic. It says changes to the way we work and more of us working from home could help demand for new homes to remain strong towards the end of the year.   

Robert Gardner added: “Further ahead, the outlook for the market is far more uncertain. If unemployment rises sharply towards the end of the year as most analysts expect, there is scope for activity to slow, perhaps sharply.

“However, shifts in housing preferences may continue to support activity, even if labour market conditions weaken. Indeed, at the end of April, 25% of homeowners surveyed said they were either in the process of moving or considering a move as a result of the pandemic, only modestly below the 28% recorded in September last year.”

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