Every year brings changes to house prices, and 2017 has been no different. So, let’s look at the trends that defined 2017, including the Autumn Budget and the Bank of England (BoE) interest rate rise.
Average house prices
Throughout the year, house prices have risen. In the South East, and particularly Southampton, the average house price has risen throughout the year. To illustrate; according to Hometrack, 2017 began with average house prices of:
- UK: £205,000
- South East: £328,000
- Southampton: £216,000
By October 2017, these were:
- UK £211,000
- South East: £341,000
- Southampton: £222,000
All three areas saw an overall increase between January and October (the latest available data), though Southampton had a peak of £224,000 over the summer (June – August) before falling back slightly.
Although house prices continue to rise across most of the UK, the year-on-year growth rate is gradually slowing. For example, in January, prices had risen by 5% year-on-year, but in November, the annual change was just 2.5%. (source: Nationwide HPI)
Bank of England (BoE) rate rise
November 2nd saw the Bank of England raise the base interest rate for the first time in 10 years, doubling it from 0.25% to 0.5%. The rise was modest and manageable, despite banks and building societies passing it on almost immediately to borrowers with standard variable rate and tracker mortgages. The concern among experts is that this is the first in a sequence of rate rises which could put pressure on household budgets and have a knock-on effect on the housing market and house prices.
Effects of the Budget
In November’s budget speech, Philip Hammond announced big changes to Stamp Duty for first time buyers.
Previously, first time buyers would pay Stamp Duty when buying a property worth more than £125,000. This was separated into bands:
- A 1% tax on the value between £125,000 and £250,000
- 5% of any value above £250,000
The new policy offers relief for first time buyers, with no Stamp Duty payable on properties up to £300,000, then 5% Stamp Duty on any value above that threshold.
This announcement had an immediate impact on buyers in the South East, with the percentage of new homeowners paying Stamp Duty falling from 98% to 35% as a result. This meant that the Average Stamp Duty paid in the South East also fell from £5,166 to £2,166. (source: Homes and Property)
The jury is still out on whether the cut in Stamp Duty for first time buyers will increase or decrease house prices.
Getting onto the housing ladder
House prices look set to continue rising, despite the occasional short-term dip. So, how can you make sure that you are in the best position to get onto the housing ladder?
- Take advantage of saving schemes
Lifetime ISAs are a relatively new type of savings account. They are designed for first time buyers and allow you to save up to £4,000 per year. Each contribution attracts a 25% government bonus until the age of 40, as long as the money saved is used for a deposit on your first home.
- Monitor your credit score
The mortgage rates you can access, and even being accepted for a mortgage, will depend on your credit history, like any other type of credit. Make sure that you know what your credit score is and use the steps outlined in our previous article to improve and maintain it.
- Consider alternatives
Buying a house with a deposit and mortgage is not the only way to own your own home. Shared Ownership and Help to Buy schemes are in place to give you a helping hand onto the property ladder.
For more information about house prices, mortgages and working toward owning your own home, get in touch with one of our independent mortgage advisers on 0800 612 8099.