House Prices Start the Year Strongly

According to the latest House Price Index from Nationwide, prices rose by 1.2% in January and are up 8.6% year-on-year.

While buyers in general, and first time buyers in particular might be a little disappointed by the figures, as deposits will need to rise accordingly, it’s good news for homeowners coming to the end of their current mortgage deal. With prices still down on the 2007 peak, the recent recovery will bring them more choice as lenders continue to demand higher levels of equity for their best deals.

It was only a matter of months ago, that homeowners coming to the end of their deal with few options to choose from because of eroded equity, could often comfort themselves with a record low standard variable rate (svr) among their sparse choices.

However, this is no longer the “no brainer it was once was, as more and more lenders are increasing their svr, as they fight to retain savers.

Fortunately, the rise in equity, greater competition between lenders, and more choice for those still restricted by equity, should offset the less attractive svr’s on offer.

It’s important that borrowers are up to speed on valuations, as over optimistic figures could be costly. It’s equally important for borrowers to check what their existing lender can offer, especially where equity remains tight, as they can often come up trumps.

Where equity levels leave the borrower close to a loan to value threshold such as 60%, 75% or 80%, the key will be to secure a deal early as the economic outlook could still reverse the recent trend in prices.

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