UK house prices have grown by 20% in the last twelve months and are still pacing forward at an alarm...
UK house prices have grown by 20% in the last twelve months and are still pacing forward at an alarming rate, says the latest economic report from Nationwide.
Monthly adjustment figures issued by Nationwide Building Society suggest house prices will rise 18% by the end of 2002, adjusted downwards from current annual growth rate of 20% because falling demand for rental property is expected to hit the buy-to-let sector.
House prices in June completed the fastest quarter of growth since 1989 with a 3.3% rise, and the price of the average UK property rose to £106,693 - an increase of 20% over 12 months.
First-time buyers are likely to be worst hit in the search for reasonably priced property, says Alex Bannister, Nationwide's Group Economist, as the average first-time buyer will need to pay 5% deposit with 3 times salary of £26,000, compared with the average UK salary of £24,000.
Londoners looking for their first property will need to earn almost double that amount, says Bannister, as an individual needs to earn £49,400 to buy the average first time buyer property, with a 5% deposit and a mortgage of 3 times salary, compared with the average London salary of around £30,000.
That said, most borrowers are putting down sizeable deposits of 15% in London at present, compared with 10% in the North East so most borrowers are not overstretching themselves.
Commenting on the figures Alex Bannister, Nationwide's Group Economist, Finance & Planning says:
"The housing market continues to hold up because of current economic conditions, notably high employment levels and low mortgage rates but its strong growth in recent months is being driven by high levels of confidence and the expectation that prices will rise strongly over the next few years," says Bannister.
"We expect the pace of growth to moderate because of modestly higher mortgage rates later this year and a slowdown in employment and earnings growth. We are revising up our forecast for house price growth in 2002 to 18%," he continues.
Although borrowers have failed to slow down spending and borrowing, homeowners are paying on average around 15% less of their salary to cover the mortgage than they would have done in 1982, when around 50% of the average was used to pay a mortgage.
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