House prices hit record high

London drives increases as average house price reaches £233,000 mark, beating the high point of the last property boom

House prices in England and Wales were £6,125 higher in May than May 2012 with sales up 19 per cent over April, according to figures out today from LSL Property Services

"The catalyst for all this has been significant improvement in mortgage availability," said David Newnes, director of LSL. "Life for first-time buyers is noticeably easier than it was six months ago. Schemes like Help to Buy and Funding for Lending have acted like a steroid injection for the mortgage market and made it markedly stronger than last year.

“But it is not quite as good as it looks. The red hot London market is giving the property market as a whole a deceptively healthy glow. London still leads the way in terms of house price rises with growth in 31 out of 33 London boroughs annually and is the only region in England with average prices above previous record levels.

"The North/South divide is actually becoming more prominent as time goes on, and as the London market is more exposed to a wider audience of potential foreign buyers flocking to the capital. More needs to be achieved to help banks lend to new buyers, as a strong improvement in first-time buyer lending is the crucial catalyst for a full market recovery."

Meanwhile, figures from chartered surveyors e-surv show that house purchase lending in May was 17 per cent higher than in May 2012.

Richard Sexton, director of e.surv chartered surveyors, said: “Lenders are lowering the drawbridge for first-time buyers. They are much more willing to lend to borrowers with deposits of 15 per cent or less which is starting to clear the logjam in the housing market. Rates are lower, criteria are easing, and there is a wider choice of mortgages available."

However, saving for a deposit is becoming harder. The average deposit for a first-time buyer increased from £24,842 in April 2012 to £27,178 in April 2013, while the proportion of their income that this deposit represented rose from 77% to 81%.

"Savings rates are rock-bottom," added Sexton, "and the cost of living and house prices are rising quicker than wages. Increasing housing stock would ease the deposit burden on buyers by slowing the rise of house prices. Building more houses is the key to making housing and mortgages more affordable."

Discover more property articles at Homes and Property
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