House prices set to rise up to 11% by 2016

  • Research by the Intermediary Mortgage Lenders Association has shown that nearly 60% of lenders and brokers believe that house prices could rise to levels not seen since 2007.

    The research is showing that lenders are already anticipating a 2.7% increase in the average house price by the end of the year which will push it to £166,418 according to the Land Registry house price index. If this growth rate continues through the duration of Help to Buy then the average house price could reach £180,265 by the end of 2016; meaning an 11% rise in four years.

    In the research that Intermediary Lending Outlook carried out, gathered views of lenders and mortgage brokers on the biggest threats to the Help to Buy scheme. Many brokers were worried about the potential lack of lender support and how it would jeopardise the scheme.

    Even with these concerns it is agreed that first time buyers will see the greatest benefit from the Help to Buy mortgage guarantee.

    Lenders are more optimistic than brokers on home movers benefitting however only 13% of lenders and 6% of brokers see the scheme benefitting homeowners looking to remortgage their properties.  

    Peter Williams, executive director of IMLA, said: "Pleasing though it is to see increasing levels of activity in the market and a swell of consumer interest, these findings spell out the importance of keeping control over any future growth. 

    "There is a clear consensus that first-time buyers stand to benefit most from the second part of help to buy. But if house prices continue to rise for the duration of the scheme, then in essence we will be giving with one hand and taking away with the other. Moreover the exit from the scheme will need to be managed very carefully so it without causing serious harm to the market.

    "If people are struggling to raise deposits in the current climate then a further 11% increase in house prices will lift the property ladder even further out of reach for some. Housebuilders are attempting to bridge the ever growing chasm between supply and demand which is going to be essential to ensure we help more people to access the property ladder without creating new hurdles in the form of inflated house prices.

    "In the meantime, the pressure is on to ensure help to buy is more inclusive than divisive. Agreement on capital weightings and on the fee lenders will be charged to participate are crucial to ensuring the scheme is made affordable for lenders as well as consumers if we want to see a similar impact as the current equity loan scheme."

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