Money News

Surprise increase for house prices in March

Friday, 3 April 2009

Writes Hazel Cottrell
hazel.cottrell@consumerchoices.co.uk

House prices increased by 0.9% in March, but first-time buyers are still struggling to get a foot on the property ladder.

The average house price increased from £147,746 in February to £150,946 in March, according to figures from Nationwide (www.nationwide.co.uk). This represents a month-on-month increase of 0.9% and is the first increase since October 2007.

This follows news earlier this week that mortgage approvals for new house purchases increased by 19% in February, according to figures from the Bank of England.

Fionnuala Earley, Nationwide’s chief economist said that while the price rise is welcome, it is “far too soon to see this as evidence that the trough of the market has been reached.”

She said the current upturn is “likely to reflect the return of buyers who have delayed purchasing through the worst of the financial turbulence at the end of 2008 rather than the beginnings of a swift recovery,” but added that the willingness of borrowers to return to the market “is encouraging.”

Simon Rubinsohn, the chief economist for the Royal Institute of Chartered Surveyors (RICS) echoed Earley’s expectation that the bottom of the price cycle is yet to be reached. He said: “while the housing market may now be out of intensive care it remains some way off a return to normality.”

He added that the issue of accessibility for first-time buyers is unlikely to be resolved in the near term. He predicts that penal interest rates on mortgages with an LTV higher than 75% will “continue to act as an impediment for many potential homebuyers who want to take their first step on the property ladder.”

Chris Eagle, commercial manager at CreditChoices.co.uk, said: “While it’s a rare treat to see some positive news in the mortgage market, it seems the real light at the end of the tunnel is some way away, especially for first-time buyers.

“If you are struggling to get your first mortgage, the best thing you can do is save, save, save. The bigger deposit you can build up, the more mortgage products you will be eligible for.”

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