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What next for house prices?

Jan 31, 2011

Continuing economic uncertainty appears to be keeping new buyers at bay in the property market. Consequently, house prices fell slightly in May* and there are currently around three times as many houses for sale as house hunters looking to snap them up.

A recent survey by the Building Societies Association found that just 45% of people think now is a good time to buy**.

So, what should you do if buying a new home is on your wish list?

Demand for property to purchase has been slowing for the last four months, with concerns about economic recovery and a lack of mortgage finance seemingly the main factors.

However, although house prices look set to be largely stagnant this year, many experts predict that they will stabilise and rise again in 2011 due to the long-standing shortage of properties in the UK.

Let’s look at some of the highs and lows facing would-be first time buyers right now:

On the downside:

As expected in June’s emergency budget, household cash flow is being squeezed by the removal or freeze of tax credits and benefits for families
The bailed-out banks are now repaying money to the government, so mortgage finance remains constrained

On the other hand:

Interest rates remain low
Lower house prices are good news for buyers
The stamp duty holiday for properties purchased for £250,000 or less is still in force (but could be withdrawn sooner than planned)

What are your options?

With interest rates at an all-time low, if you are able to provide a deposit for a new home (you will need at least 10% of the purchase price to apply for a mortgage with most lenders) then consider buying this year. House prices could even tumble a little further if sellers continue to outnumber buyers.

If the deposit required is a barrier for you, then check out the government’s HomeBuy Direct scheme. If your total household income is £60,000 or less, you could be eligible for the scheme which provides an interest-free equity loan for up to 30% of the purchase price on specific new-build properties. At Teachers Building Society, we support this scheme by providing a mortgage for up to 70% of the purchase price (subject to approval) meaning that you may not need a deposit at all.

If you’re going to delay buying a property until you’ve saved the necessary deposit, then find a good home for your savings. A fixed rate bond or other restricted access account might help you to leave your money where it is while it earns a decent return. At the same time, manage your money well. A good credit history will be important to lenders when you come to apply for a mortgage.

Already have a mortgage?

If you already own your home and have had a mortgage for three years or more, consider moving to another lender. If your current mortgage is for 75% or less of your property’s current value, you may be able to achieve a very competitive new deal that could free up some cash every month. Check your mortgage arrangement, though, to make sure you won’t have to pay early repayment charges if you decide to move it.

For more information about the mortgage service at Teachers Building Society, call the friendly mortgage consultancy team on 0800 378 669 or visit the mortgage pages of our website.

* Source: Land Registry of England & Wales (
** Source: BSA Property Tracker Survey, June 2010 (

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