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House prices up 10% as mortgage rates fall further

House prices up 10% as mortgage rates fall further

Category: Mortgages

Updated: 14/01/2015
First Published: 14/01/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Yet more figures have been released this week to indicate that house price growth is moderating, with official figures from the ONS showing that house prices rose by 10% in the year to November 2014. It may sound high, but it's down from the annual growth rate of 10.4% seen in October and is well below the recent peak of 12.1% in September, suggesting that any fears of a housing bubble should be long gone.

London leads the way

Despite this slight moderation, the price of a typical UK home still rose to £271,000 in November, an increase of 0.2% month-on-month. But, as ever, it's the London market that continues to lead the way – price growth remains strong across much of the UK but the capital saw an annual increase of 15.l3%, which is clearly having a huge impact on the overall pace of growth. The East and South East also saw above-average annual growth rates of 11.9% and 10.8% respectively. By excluding London and the South East, UK house prices increased by a much more modest 7.1% in the 12 months to November.

Falling rates = good news for borrowers

House prices may be rising, but happily, the cost of being able to finance that all-important house purchase is actually falling. Figures from Moneyfacts show that mortgage rates are continuing to fall and have hit fresh lows, with the average two-year fixed rate standing at 3.19% and the average two-year tracker at 2.16% - both the lowest ever recorded.

It means that those seeking to buy their first home, make their way up the ladder or simply remortgage will be able to find the cheapest deals ever, which will make those rising house prices slightly more palatable. It also gives borrowers the chance to fix their payments at a low rate ahead of an eventual rise in base rate – it may seem a long way off thanks to inflation falling to 0.5%, but it's still important to be prepared.

As an added bonus, the rise in 10-year mortgage deals means you now have the opportunity to fix your mortgage at a record low rate for up to a decade, giving valuable peace of mind for the long term. And that's not all – providers aren't only reducing rates, but they're also reducing fees, meaning the true cost of a mortgage is also edging down.

Pay less for your mortgage

The average fee now stands at £707, a drop of £22 from December when the figure stood at £729. Significantly, it's fallen by over £100 in the last year – in January 2014 the average fee charged was £833, marking an annual reduction of £126, so you could be far better off should you choose to arrange your mortgage in the next few weeks.

Providers are genuinely cutting the cost of borrowing as consumers are becoming far more conscious about the true cost of a mortgage, because as we know, it isn't just the rate you need to think about. Upfront costs, such as fees, can have a dramatic impact on the overall cost of your mortgage, particularly if you add it to the advance – you could end up being charged interest on that fee for the life of the mortgage – so by reducing fees, providers are offering a far better deal.

So, all in all, it's a great time for borrowers. House prices may be rising but, thanks to mortgage rates and fees both falling to record lows, you won't need to spend a fortune to buy that new home, and if you switch to a fixed rate mortgage deal, you'll be able to keep your repayments at these record low levels for years to come.

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