House Prices Continue to Rise

According to data from Halifax the house prices have fallen for the third time in four months and fell 0.6% in June. Furthermore, a survey of U.K. households found that people believe that housing prices will continue to ease throughout the year. Around 1-in-13 property owners expects the value of their property to decrease by July 2015.

House Prices aren’t rising as Quick as Previously

Although the past several months has shown a subtle drop in prices following new restrictions placed on mortgage lending, when the big picture is analysed the data shows that prices are still rising at record levels. The latest government figures suggest that housing prices are up by 10.5% in May from the year before and London prices are up by 20.1%. House prices paid by first-time buyers are 11.3% higher on average in May and 10.1% for existing owners in the same period.

Therefore, despite the small decrease in housing prices, the overall housing picture shows rising house prices are excluding many potential house buyers from the market. The concern extends beyond the boiling prices because people that are desperate to get on the property ladder quickly and take out a mortgage would be reaching far beyond their income and with potentially rising housing cost, this is a risk neither the borrower nor lender can afford. Halifax has suggested that house prices had fallen slightly in June but are still roughly 5 times the salaries of potential buyers.

Mortgage Activity has Slowed

Even with the recent decrease in mortgage activity and prices, many experts still believe that house prices are likely to increase over the coming months. More worrisome is that PWC experts believe that the cost of a London home will reach £500,000 in London and the cost an average home in the UK will leap by more than a third nationwide to £328,000 before 2020.

The housing demands are supported by the tepid economic recovery that is finally heating up, increased consumer confidence, growing employment levels, Help to Buy and low mortgage interest rates. Although the government and lenders have taken an initiative to slow down lending and demand, the market is still unbalanced with lack of sellers in some areas and a shortage of homes driving up prices.

The numbers have suggested that the new regulations introduced by the Mortgage Market Review and high housing prices have cooled the housing market but economists also believe that the effects are temporary and the bigger picture has to be addressed before the complaints stop completely.