According to the latest house price index from the Office for National Statistics, house prices are continuing to accelerate – this time posting a rise of 9.1% in the year to February bringing the average UK property to a whopping £253,000.
This rate of annual growth is a significant increase from the 6.8% recorded in the year to January, and also marks the biggest annual rise since June 2010. Prices rose by 1.9% between January and February alone, while the Index itself has reached 192.2 – 3.6% higher than the pre-financial crisis peak of 185.5.
As might be expected, this rapid acceleration of house prices has been largely driven by the London market with prices rising by 17.7% over the year, although strong growth has been recorded across most parts of the UK. Excluding London and the South East, however, UK house prices increased by a more modest 5.8%, indicating that not all areas will be feeling such pressure.
What might be surprising is that first-time buyers have been feeling the keenest effects of house price inflation, with prices paid by this sector of the market being 10.5% higher than in February 2013. This is compared to owner-occupiers, who saw prices rise by 8.6% over the same period – still a significant sum, but perhaps more positive for those who have already built up equity.
But, these rising prices won't be welcome news for those who find they need to save up an even bigger deposit to buy their first home, nor for those already struggling to make the mortgage repayments – and they'll be even less welcome when rates start to rise.
Research from the Debt Advisory Centre has revealed that 1 in 20 adults surveyed had to use credit to pay their rent or mortgage payments in February, highlighting the difficulty many are already finding themselves in. This is double the number recorded in August 2013 and for Londoners the figure is even higher, with more than 1 in 10 turning to credit – perhaps unsurprising given the higher prices in the capital.
With the prospect of a rate rise on the way it's a particularly worrying figure, especially for those seeking a larger mortgage. Those already struggling may find it even more difficult when mortgage rates have risen by a percentage point or two, so the key is to take control and start organising your budget.
If you find you need to turn to credit to pay such a priority bill it's a sign that something needs to be done, so seeking the necessary advice and thoroughly analysing where your money goes each month – and making the necessary cutbacks – should be first on your list.
However, one of the most important things you can do is make sure you've got a mortgage that offers the best rate possible. With rates set to rise in the not-too-distant future it's a great time to consider the various fixed rate deals currently on the market, and whether you're looking for a two, three or five-year fix (or even longer should you wish) you can keep your payments as low as possible for as long as you can, and you'll be able to keep track of your budget for the foreseeable future too.
There are plenty of great deals around and you'll want to act fast before providers start amending their rates, so check out our comparison tables and see how much you can save – and how much you can continue to save for the years ahead, no matter how fast house prices rise.
Use our mortgage calculator.
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