A frenzy of activity has driven UK property prices to a record high this month, just as the government launches a mortgage guarantee scheme to help people with small deposits on to the housing ladder.
Online property portal Rightmove said the average asking price jumped by 2.1% in April to a new all-time high of £327,797, an increase of £6,733 from March.
The surge was driven by a shortage of houses on the market, at a time when the coronavirus pandemic is driving many families to search for more spacious properties away from the cities, following the shift to working from home.
Some potential sellers are holding off until they have been vaccinated against Covid-19, agents say, adding to a dearth of properties available.
From Monday, several banks and building societies will begin offering mortgages covering 95% of a purchase price under the government guarantee scheme. Announced in March’s budget, it will allow lenders to buy a guarantee on the portion of the mortgage between 80% and 95%. The government will then cover losses on that slice of debt if a borrower gets into financial difficulty and their property is repossessed.
Ministers say it will provide an affordable route to home ownership, with Lloyds, Santander, Barclays, HSBC and NatWest launching mortgages under the scheme on Monday.
“Every new homeowner and mover supports jobs right across the housing sector, but saving for a big enough deposit can be hard, especially for first-time buyers,” said the chancellor, Rishi Sunak. “By giving lenders the option of a government guarantee on 95% mortgages, many more products will become available, boosting the sector, creating new jobs and helping people achieve their dream of owning their own home.”
However, Rightmove’s monthly survey found that the stock of properties available to buy has fallen to the lowest proportion recorded, with buyers snapping up properties quicker than ever before.
The average number of days to sell a property has also dropped to its lowest-ever level, at just 45 days, reflecting the scramble to secure a deal.
The number of houses selling within a week of being advertised hit its highest-ever level in March, at 23% of sales. Two- and three-bedroom semi-detached houses are being snapped up the quickest, with 30% being marked as sold by agents after less than a week on the market.
“The stars have aligned for this spring price surge, with buyers’ new space requirements being part of the constellation alongside cheap mortgages, stamp duty holiday extensions in England and Wales, government support for 95% mortgages and a shortage of suitable property to buy,” said Tim Bannister, Rightmove’s director of property data.
Growing optimism due to the vaccination rollout is also encouraging people to look for a “fresh start in fresh surroundings”, Bannister added.
Richard Freshwater, director at estate agent Cheffins, said demand has been fierce in his East Anglia patch, from small city houses in Cambridge to large country homes, with demand likely to remain strong this summer.
“Many sellers are currently holding fire on putting their houses on the market until they have had their second Covid vaccination, and with this in mind, once the vaccine rollout gets into its later stages I would expect to see a good number of properties hit the market as people look to get on with selling,” he said.
Lenders had shied away from offering mortgages to buyers with only 5% deposits when the lockdown began last year. Increasing the availability of 95% loan-to-value mortgages will help those in the most affordable parts of the UK, said Richard Donnell, director of research and insight at property website Zoopla.
“Greater availability of 95% mortgages will have the greatest benefits for buyers in lower-value housing markets in northern England and Scotland where a 95% mortgage is more attainable,” he said. “The scheme will have less impact for buyers in southern England where high house prices are a major barrier to being able to afford a 95% mortgage. This aligns to the levelling up narrative and policy approach of government.”