UK House Prices Soar In 2021

The UK economy may have seen a rocky last couple of years, but house prices have continued to surge, making mortgages less affordable.

New data from the Office for National Statistics (ONS) has highlighted just how much the country has been impacted by a combination of factors that has pushed prices up.

In 2020, a key feature of the market was a surge in the price of rural homes as the London market hit the buffers, driven by the desire of people to live in spacious green places away from crowded towns and cities.

This situation led to London prices and rents stalling and sometimes even falling for much of the year, especially in central areas. However, towards the back end of 2020, stimulated by the stamp duty holiday, this changed rapidly as the annualised rate of house price growth in the capital surged, up from 4.6 per cent in October that year to 9.7 per cent just a month later.

However, the story of 2021 was of a steady increase of house prices across the UK, up 10.8 per cent to reach an average of £275,000.

Of the four nations, the highest rate was 13 per cent in Wales, taking prices there to £205,000. Scotland had an increase of 11.2 per cent to £180,000 while both England and Northern Ireland were up by 10.7 per cent. This raised the English average to a record £293,000, while the figure for Northern Ireland was £159,000.

While the stamp duty holiday only affected part of the year, other factors had an impact. These included limited supply due to the impact of Covid on construction output, something that still hasn’t returned to pre-pandemic levels as the nominally impressive record growth of 12.7 per cent seen in 2021 has to be set against a 14.9 per cent drop in 2020.

Whatever the causes, rising prices mean anyone who wants to get on the housing ladder should see a first time buyer mortgage advisor, in order to get the best possible deal.

When considering what mortgage to get, interest rates are a major factor to take into account. A standard variable rate mortgage will tend to become more expensive if interest rates rise as lenders tend to pass on these increases, whereas a fixed rate deal will ensure you pay the same for a defined period.

The last two meetings of the Bank of England’s Monetary Policy Committee (MPC) have seen increases in the base rate, from a record low of 0.1 per cent to 0.25 per cent in December and then up again to 0.5 per cent in February. This has been done in order to curb inflation, which is at its highest level in three decades and is expected by the MPC to peak at seven per cent this spring.

However, it is worth considering that the action taken by the MPC so far has been undertaken in the hope that they have now done enough to take the air out if the inflationary balloon. The February Inflation report has made clear that if this does not happen, rates will be increased “somewhat further” in the months ahead, with further potential implications for mortgage costs.

Your Home may be repossessed if you do not keep up repayments on your mortgage.

A fee may be charged for mortgage advice. The exact amount will depend on your circumstances. I.I Financial Services Limited is an appointed representative of The Right Mortgage Limited, which is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales company no. 10817448. Registered office Expressway G15, 1 Dock Road, London, E16 1AH