House prices see fastest growth since 2004

House prices have seen their fastest growth since November 2004 with the average house price standing at £245,432 during June, the Nationwide House Price Index reports.

Year-on-year, the average house price has risen by 13.4% and June also saw a month-on-month growth of 0.7%. “While the strength is partly due to base effects, with June last year unusually weak due to the first lockdown, the market continues to show significant momentum,” explained Robert Gardner, chief economist at Nationwide.

Although house prices have continued to rise, mortgages have remained affordable, mainly due to the low rates currently available. Indeed, in both the remortgage and moving home mortgage charts there are currently two year fixed deals offering sub-1% rates.

The first-time buyer mortgage chart has also seen an increase in competition over the last few months, but the rise in house prices makes saving for a deposit harder for many potential homeowners. “For example, a 10% deposit is over 50% of typical first time buyer’s income. A potential buyer earning the average wage and saving 15% of take home pay would now take five years to raise a 10% deposit,” Gardner revealed.

“The improving availability of mortgages for those with a small deposit (and the continued availability of the government’s Help to Buy equity loan scheme) is helping some people over the deposit hurdle, but it is still very challenging for most.”

Along with the Help to Buy equity loan scheme, there are several other schemes available that aim to help first-time buyers get onto the property ladder. This month, for example, the Government launched its First Home scheme which is aimed at helping first-time buyers and keyworkers get onto the property by offering up a discount of up to 50% off the price of their first home. More information about the First Home scheme can be found here.

In addition to this, those saving towards the deposit of their first home may want to consider opening a Lifetime ISA (LISA), which offers a 25% Government bonus each year on money saved into the account. Savers considering a LISA should, however, be aware that withdrawing money for any purposes other than for a few select reasons, including for a deposit for a first home, can result in a significant penalty that can result in having less money in the account than was initially deposited. To find out more about LISAs visit our LISA page.