UK house prices rising at 11% a year

Over the last few years, prices of a range of goods and services have been increasing dramatically. The rate of inflation has been going up at levels not seen for decades. One of the biggest increases has been the UK house prices rising at a steady pace. This year alone, they have skyrocketed to an 11% rise, making it the 12th monthly rise in a row.

The average price of a home was £271,209 in July 2022, which is 0.1% higher than June. According to the latest figures from the Office of National Statistics, the average UK house price in July was almost £32,000 higher than July last year.

Nationwide Building Society said it expects the market to slow down with the cost of living crisis continuing, as inflation is set to reach double digits this winter. This means the continuing of house prices rising throughout the year before cooling down throughout 2023.

Mortgage Deposits

With the cost of living crisis and inadequate salaries, many people are struggling to save for a mortgage. The minimum deposit for a mortgage is usually 5%, however most lenders and banks would prefer first time buyers to have a minimum of a 10% deposit. 

With a 10% deposit, you’re looking at an average of £25,000 upfront. It’s also important to note that smaller deposits likely mean higher interest rates, meaning you’re paying more in the long run. Data from 2021 found that in England, a full-time employee can expect to spend around 9.1 times their annual earnings on purchasing a home.

It’s also important to note how the UK house price to earnings ratio has changed over the years. Nationwide’s data shows that buying a home in 2022 is more expensive than it has ever been. 

Base rate increase

The Bank of England has changed its base rate to 2.25% on the 23rd September 2022, as a way to tackle inflation. The Bank of England has said that this “will take time to work”. 

“It’s likely that inflation will keep rising this year, and start to come down next year”.

Making the base rate higher should overall help bring inflation down. Higher interest rates will make borrowing much more expensive and motivate people to save up. This will reduce how much everyone spends, and should push inflation down in time. Since December 2021, interest rates have climbed from 0.1% to 2.25%.

To find out more about the constant changes to the Bank Rates, click here.

Some good news

According to the head of UK residential research, Tom Bill, “a slowdown is in the post”. The 0.1% house price gain from June was the smallest increase for a year, indicating that perhaps the property market is cooling amid the worsening cost of living crisis. Lloyds Bank also speculates that things will get worse before they get better. According to their predictions, house prices will grow 1.8% this year, then fall 1.4% in 2023.

Our Advice

Set yourself some realistic saving goals. If you are considering buying a house, or if you just generally want to have savings for a brighter future, now is the time to start budgeting. It’s not easy to save up during these hard times, however there are some tricks that could potentially save you some money in the long run. 

1. Set yourself a standing order for your savings account. 

Even putting away as little as £20 a month is a start! It would be like a monthly subscription or paying a bill. The fantastic thing about this is, you are essentially paying yourself for a better tomorrow. 

2. Save with your partner

Two incomes is always better than one. Putting money away into savings can be a lot easier when you can pool your resources. This option would also undeniably speed up the process and you could reach your savings goal twice as fast.

3. Stay in control of your direct debits

Check your bank statements and look at your set direct debits and standing orders. Check if there are any unnecessary payments leaving your account and cancel unwanted subscriptions. You can do this online or with your bank.

4. Shop around for cheaper mobile phone contracts

Use online price comparison websites that allow you to find the cheapest tariffs. The same can be done with switching your energy provider or broadband packages.

5. Look for cheaper insurance deals

Just like mentioned above, there are price comparison tools online that allow you to search a much wider market for the cheapest tariffs. Whether it’s car, pet or life insurance, companies usually provide great deals for people who switch to them.

6. Consider using a budgeting app

There are many apps available that help you budget. Some of those apps can show you clear calculations of how much you could potentially save by cutting unnecessary expenses. 

7. Change your living situation

Many young adults stay with their parents for as long as they can to save funds. The other option is to find a group of people to rent a house with. If you are currently renting by yourself, think how much money you could save without all of the bills that come with living on your own. 

Important

Don’t take on loads of unsecured loans as these will all be factored in to your affordability assessment when it comes to getting a mortgage. Because unsecured debt is usually more expensive and over a short term it could mean you cant borrow as much and could miss out out on the home of your dreams.