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Why do house prices rise?
You might never have really stopped to think about it, but house prices are a big part of all homeowners’ lives. If you’re a first-time buyer, you’ll be worrying when house prices go up in case you’re priced out of the market and if you already own property, you won’t want them to fall too low otherwise you could lose money on your home.
But is there a reason why house prices go up or down? And what can this mean for you when you’re looking to buy property? Let’s take a look at everything that can influence property prices.
London house prices
Currently, there is a two tier housing market in the UK. Prices in London and the South East are rising, whilst across the rest of the UK they are broadly static, or in some areas even falling. House prices in London continue to rise quickly – and seemingly unstoppably. What is driving this is the imbalance of supply and demand. The capital continues to grow – which means more people want to live there and buy a home. But the supply of housing is fairly fixed. So there is a shortage of housing in the capital and a rising number of people trying to buy property there. This is causing the price of property in London to increase dramatically, and it means that some people are finding themselves priced out of the market if they’re trying to buy in the area.
Another factor impacting on demand is the rise of buy to let – more people are buying property as an investment, then looking to rent it out.
The rest of the UK hasn’t had such striking growth in house prices, but certain areas are seeing increases, and these are usually hotspots where demand for housing is exceeding the supply of those that want to sell. This is because the economy as a whole is improving – households have more money in their pockets and the low base interest rate has meant that mortgage deals have been competitive. It’s easy to see the correlation between house prices and the economy – house prices climbing generally means the economy is strong as well.
There has also been a lot of debate about what is holding back supply – some blame the planning laws and the green belt restricting development, whilst others point to “empty nesters” that aren’t trading down to smaller homes.
Getting a mortgage
With the base interest rate being kept at its historic low of 0.5% for yet another month, it could be a good time to think about buying property. The interest rates available at the moment on two, five or 10-year mortgages are close to all-time lows. You may be tempted to wait and see if the rates get any better – however, if you wait too long, it’s likely that the Bank of England will put its base interest rate up. Any sign that this will happen and mortgage lenders are likely to increase their interest rates as well, so you may not get the best deal by trying to time the bottom of the market.
Try looking at a range of high-street mortgage lenders to see the deals that they’re offering – you’ll be able to compare to see which is best for you. You might also be able to get a good deal with a mortgage broker like Ocean as they often have access to mortgages which are exclusive to brokers and not available on the high street.