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Nationwide has revealed that the price of a typical UK home rose by 3.7% last month compared to a year earlier, the fastest annual growth rate for two years. With average property costs at £268,144, these values are close to the record high of £273,751 reached in August 2022. The acceleration in house price growth is surprising, given affordability remains stretched by historic standards. Mortgage approvals in October hit the highest monthly level since August 2022, according to Bank of England figures released last week. Nationwide predicts that the market will see the number of sales increase over the next few months, ahead of changes to stamp duty due to take place in April.
Nationwide’s chief economist, Robert Gardner, has noted that low unemployment rates and increased pay have helped to “underpin” the housing market. At the same time, some housing market analysts have argued that reduced stamp duty rates in England and Northern Ireland which end in April were behind the property price increases last month. However, Gardner rejects this theory, stating that the “majority of mortgage applications commenced before the Budget announcement”. Nationwide expects an increase in house sales in the first three months of 2025 as people seek to beat the deadline, followed by a decline in activity in the following few months.
Looking beyond this deadline, Gardner predicts that the housing market will gradually strengthen as consumers’ spending power is boosted by lower interest rates and higher pay. However, Sarah Coles, head of personal finance at Hargreaves Lansdown, warns that there is a growing chance affordability problems associated with high purchase prices will begin to emerge given mortgage rates are relatively high. Millions of individuals still anticipate higher mortgage payments over the next few years given higher interest rates on loans. In addition, an increasing number of homebuyers are taking out extended or ultra-long mortgages as they aim to spread the cost of buying a house. While this strategy may initially reduce the monthly cost of the loan, in the long run, it makes mortgages more expensive and affects retirement finances. The bank issued more than one million mortgages in the last three years, where lenders expect their homebuyers will repay the mortgage into pension age
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