UK house prices reach record high

Bad news for potential buyers as the average house price rose by £27,000 last year.

The latest UK House Price Index recorded average house prices up 10.8% in the year to December 2021. According to data from the Land Registry, it is the biggest gain in a calendar year since 2002.

This means the average UK home is now priced at £274,712, with property remaining the most expensive in England at an average of £293,339.

Conversely, Northern Ireland remains the cheapest place to purchase property in the United Kingdom, with the average house price at £159,000.

“House price growth was strongest in Wales where prices increased by 13.0% in the year to December 2021. The lowest annual growth was in London, where prices increased by 5.5% in the year to December 2021,” the Government said in a statement.

With inflation still on the rise, pressure will grow on the Bank of England to raise interest rates once again. Coupled with rising house prices, this can make it more expensive for first-time buyers to own their first home.

“Those hoping to take their first step onto the property ladder may understandably feel a little disheartened as the cost of living and house prices continue to soar,” said Eleanor Williams, Finance Expert at Moneyfacts.

However, she encouraged potential first-time buyers to start saving towards a deposit for their property.

“Speaking with a broker or qualified adviser may be extremely beneficial in calculating how much they may be able to borrow and gaining support in navigating an ever-changing landscape and the mortgage options available to them.”

Although mortgage rates have been increasing overall of late, average rates at a 95% loan-to-value ratio – a sector often favoured by first-time buyers with limited deposits – have fallen recently.

Our recent data shows that the average rate for a two-year fixed-rate mortgage at 95% loan to value ratio stood at 3.69% in August last year, today it stands at 3.05%. Likewise, the average rate for a five-year fixed-rate mortgage at 95% loan to value ratio was 3.93% for August, but now stands at 3.35%.

“Both the average two- and five-year fixed rates have fallen notably over the past six months and there are plenty of competitive products available for would-be borrowers to consider,” said Williams.

Homeowners over the age of 55, however, could consider using their home for equity release. With rising house prices, you can get more money out of your house than you anticipated.

Still, deciding whether to use equity release on your property depends on your individual circumstances. Unlocking too much equity release could result in leaving a significantly lower inheritance behind than intended if house prices crash. 

Some experts are predicting house prices will fall later this year, which will make the decision to use equity release more significant. If you are considering releasing equity from your property, we recommend you speak to an equity release broker who will find the best deal for you.  

In a separate study released by the Office for National Statistics, rent rose 2% in the 12 months to January 2022. Excluding London, rent across the UK rose 3%.

This may come across as good news for landlords who have also benefited from an increased level of product choice for buy-to-let mortgages, according to our data.

“After a rise of 222 products month-on-month, the year began with 3,528 total products on offer to landlords, the highest number seen on our records since September 2007,” said Williams.

She also referred to data from Zoopla, which indicated that rental demand grew to a 13-year high in the third quarter of 2021.

“While demand for property continues to outstrip supply, it also recorded an increase in average UK rents of 4.6% over the year, so there may be those considering investing in the sector,” said Williams.