UK house prices have risen again, the biggest building society Nationwide has said. In May, the average house price rose 0.4% to £264,249, up from £261,962 in April. This comes after two months of declines, which led many to hope that prices would continue to fall.
What is the secret behind the sudden growth in the economy?
The economy has taken off suddenly recently and there are many factors behind this. People’s purchasing power has increased – salaries have increased and inflation has decreased. This encourages people to spend more.
Also, mortgage rates are relatively low, making it easier to buy homes.
However, there are also some difficulties. Housing prices are still very high and few people can afford to buy houses. Also, inflation in the services sector is still high, leading to an increase in people’s spending.
Expert opinion
Andrew Harvey (Nationwide, Senior Economist):
- Rising housing prices are a real concern, but I think the economy has resilience.
- I don’t understand why the Bank of England is delaying raising interest rates. Inflation is rising in the service sector and interest rates need to rise soon.
Sarah Coles (Hargreaves Lansdowne, Head of Personal Finance):
- Rising home prices are certainly a deterrent, especially with rising mortgage rates.
- But strong wage growth and low unemployment have kept people wanting to buy a home.
What next?
- Bank of England: On June 20, the Bank of England will decide whether to raise or lower interest rates. Even if inflation is falling, the bank may be reluctant to cut interest rates to reduce it further.
- House prices: The election on July 4 is expected to have little impact on house prices.
Tips for affordable mortgages
- Pay more:
If your loan is at a lower rate, pay more on the existing mortgage. This can save money in the long run.
- Pay interest only:
You can take out an “interest only” mortgage, but remember that the principal amount of the loan must be paid.
- Extend the deadline:
Extending the mortgage term (eg 30 or 40 years) will reduce the monthly installments, but pay interest over a longer period of time.