Little change on the home front in 2013 as things stay tight

Experts predict property prices will stay virtually flat next year. Chiara Cavaglieri and Julian Knight report

There has been a lot to celebrate this year with the Queen's Jubilee and the capital hosting a successful Olympics, but there is no getting away from the fact households have been under pressure.

Budgets were squeezed ever tighter and austerity measures hit hard, but with 2013 looming, what can we expect from the property market?

House prices have been relatively stable with the latest Halifax index showing that for November 2012 they were at an average of £160,879, virtually unchanged on a year earlier. Getting a mortgage remains an uphill struggle, but availability did start to improve slightly towards the end of the year, and while deposits are still very high, they did fall below 20 per cent for the first time in three years.

The general consensus from the experts is that we can expect more of the same in 2013. The Royal Institution of Chartered Surveyors (Rics) is expecting house prices to rise by 2 per cent over the course of next year, albeit with considerable regional variations – beyond London, the South-east and North-west, they think the rest of the country will see prices dip slightly, or remain flat. And, although still a far cry from sales figures in 2006 which amounted to 1.67 million transactions, Rics says the number will move up just over 3 per cent on 2012 to 960,000.

Estate agent Savills has predicted the average UK house price will rise by just 0.5 per cent in 2013, while Halifax also forecasts modest, very slow growth as the economy strengthens, albeit with a continued disparity between London and the South-east and the rest of the country.

"There has been a distinct, north/south divide in house-price performance during 2012 with the strongest gains in London while prices have fallen modestly in northern England, the Midlands and Wales. We expect this broad pattern to continue next year," says Halifax's housing economist, Martin Ellis.

Likewise the Nationwide's chief economist Robert Gardiner reckons downward pressure on wages will mean "house prices are likely to remain broadly flat or decline modestly over the next 12 months".

Even in the active London market there are signs things could be going into reverse, with the Office for National Statistics saying that prices fell in the three months to the end of October with the average home within the M25 fetching £388,000 today compared to £399,000 in August.

The Bank of England base rate has been at 0.5 per cent since 2009 and there is nothing to suggest it will move soon, but mortgage rates have been fluctuating. The average, five-year fix has fallen from 4.61 per cent in January 2012 to 4.27 per cent this month, according to comparison site Moneyfacts.co.uk. The Bank also recently reported that the average, five-year fixed rate on a 75 per cent loan-to-value (LTV) mortgage was below 4 per cent in both October and November.

Keener rates have come off the back of improved European funding conditions, as well as the launch of the Funding for Lending Scheme (FLS) which has seen some of the UK's biggest banks access cheaper funding.

Property site Rightmove anticipates muted transaction levels in the new year, but says there will be some improvement as the FLS fuels greater competition and an increasing number of successful mortgage applications, with attractive applicants securing more favourable deposit requirements and interest rates.

"On top of the small uplift seen in 2012, we anticipate a further marginal but encouraging boost to mortgage lending next year. This will be particularly welcomed by frustrated first-time buyers," says Miles Shipside, a housing market analyst for Rightmove.

But borrowers requiring higher loan-to-value (LTV) ratios can expect to continue to pay a premium compared to those with larger deposits. For the lucky few who have 40 per cent deposits, banks cut rates to record lows in 2012 and although the FLS may filter down and lead to more competitive high LTV products next year, conditions will still be tight.

"While mortgage rates will stay low, this doesn't necessarily mean more of them will be approved. Lenders are likely to keep their criteria tight, meaning first-timers in particular will continue to struggle. The Bank of Mum and Dad will be called upon more than ever," says Adrian Anderson, a director of mortgage broker Anderson Harris.

And, if we've learned one thing this year, it's that external pressures such as the eurozone crisis can be unpredictable. With no crystal ball, any decision is going to be difficult, but it pays to weigh up all your options. There is no way to know how long some of the headline cheap fixes will be around, so if you're looking to remortgage and you have decent equity, 2013 could be a great time to switch. Watch out for arrangement fees, however, as these have been creeping up as providers try to compensate for competing to offer the lowest rates.

For first time buyers looking to buy without the huge deposits, innovative products such as Halifax's Lend a Hand mortgage, family guarantee products and the Government's shared ownership (NewBuy) and shared-equity (FirstBuy) schemes, are worth investigating.

"The Government has increased its FirstBuy scheme by £280m which could help an extra 16,500 people get on the property ladder next year," says Charlotte Nelson from Moneyfacts.co.uk.

New homes are being built too – there was a 36 per cent rise in approvals for new homes in the three months to September, according to the Home Builders Federation, but the second-home market could stay at a standstill. "Buyers still view second homes as a discretionary purchase and until the property market shows signs of a significant recovery it is unlikely there will be any increase in demand," says George Wade, a partner at independent buying agents Property Vision.

However, for anyone looking to invest, 2013 could prove to be an opportunity. Landlords were the real winners of 2012 and the rental market was kept busy with lenders advancing just over 100,000 buy-to-let mortgages in the first nine months of the year, up 15 per cent on 2011, according to the Council of Mortgage Lenders.

Given the squeeze on incomes, rents may not have much further to go and house-price declines could erode equity, making it difficult for landlords to access the better mortgage rates. But existing landlords seem confident they will have another bumper year: a poll from LSL Property Services reveals just over a third expect to increase rents in 2013 by an average of 4.6 per cent.

Discover more property articles at Homes and Property
Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
voicesIs a huge gamble on oil keeping the First Minister up at night?
Life and Style
tech

Apple has been hit by complaints about the 1.1GB download

Life and Style
life

Sport
A 'Sir Alex Feguson' tattoo
football

PROMOTED VIDEO
Arts and Entertainment
Pointless host Alexander Armstrong will voice Danger Mouse on CBBC
tv

Much-loved cartoon character returns - without Sir David Jason

Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

Arts and Entertainment
Actor and director Zach Braff
tv

News
i100
Arts and Entertainment
Rosalind Buckland, the inspiration for Cider with Rosie died this week
booksBut what is it like to be the person who inspires a classic work of art?
Arts and Entertainment
tv

News
i100
Arts and Entertainment
The former Doctor Who actor is to play a vicar is search of a wife
film

Matt Smith is set to join cast of the Jane Austen classic - with a twist

Arts and Entertainment
Lionel Messi in action for Barcelona
filmWhat makes the little man tick?
Arts and Entertainment
Meera Syal was a member of the team that created Goodness Gracious Me
tv

Actress to appear in second series of the hugely popular crime drama

Arts and Entertainment
tvReview: An undercooked end (spoiler alert)
Life and Style
i100

Arts and Entertainment
Pharrell dismissed the controversy surrounding
musicThe singer said 'the last thing I want to do is degrade'
Property search
Property search
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Data Analyst / Marketing Database Analyst

£24000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

Business Analyst – 2 year fixed term contract – Kent – Circa £55k

£45000 - £55000 Per Annum 31 days holiday, pension, healthcare, annual bonus: ...

**SEN Primary Teacher Serf Unit **

£110 - £120 per day: Randstad Education Preston: We are looking for an experie...

Experienced Foundation Teacher

£100 - £222 per day: Randstad Education Bristol: We are currently recruiting f...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week