First time buyers fuelling fast price rises for property, says Nationwide

Property prices continued to climb this month, with one the UKís major building societies indicating that they rose by 0.7% in their most recent house price index.
Nationwide identified that house prices rose for the 12th month in a row with the 0.7% taking the last 3 months inflation rate in the property market to an emphatic 2.9%.
And the news will be a blow to prospective homeowners who are now facing the prospect of seeking higher loan to value mortgages at a time where interest rate rises are most certainly on the horizon. 
Last year prices rose by 8.8% over the course of the year, marking the largest increase in 2 years, though it had been hoped that the market would stabilise in the opening months of 2014.
However, the average house in Britain now costs £176,491, an almost £15,000 rise from the equivalent statistic back at the start of 2012. 
Nationwideís chief economist, Robert Gardner, identified that an improvement in the countryís unemployment mate, exceptionally low mortgage rates and a revitalisation of consumer confidence in the property market were all major factors for the continual price rises across the country. 
“There have been encouraging signs that activity levels in the housing market are also gradually returning towards more normal levels,” he said. 
“The pickup in activity appears to be fairly broad based, and it is encouraging that first-time buyers are a key driving factor behind the upturn.”
Statistics released by the HM Revenue and Customers earlier this month illustrated that the number of property transactions in the month of December had risen by 103,000, marking a monumental 30% rise from the equivalent figure back in 2012. HMRC identified that a large proportion of mortgage applicants have been first time buyers, who have capitalised on low interest rates, lower deposit requirements and higher loan to value mortgages in the past 12 months. 
The relentless rise in house prices in recent times has fuelled fears of a potential ëhousing bubbleí occurring sometime in the near future, with economist and politicians alike calling for the Bank of England to intervene and take positive action now.
The governmentís flagship Funding for Lending and Help to Buy schemes have enhanced the availability of mortgage products for borrowers, with the latter enabling prospective owners to acquire as high as 95% loan to value mortgages whilst only having to stump up a 5% deposit.
Meanwhile, the Funding for Lending scheme has meant that providers are far more willing to supply mortgages to a broader range of applicants as they are receiving low interest finance from the government.
And whilst this has breathed new life in the property market, it has nevertheless inflated demand artificially at a time when house building levels in the UK are particularly low, and as such property prices have risen at their historic rate. 
As prices stand now, the average property in the UK totals over 4.5 times more than their average annual income, which is far higher than the two decade average of 3.6.
In the third quarter of 2013, 73,700 borrowers were buying their first home, a 32% increase on the previous year.
Mr Gardner argued that whilst it was entirely positive that the property market had new levels of consumer confidence that measures should be taken in order to prevent people falling into debt when interest rates rise.  
“More than a million first-time buyers have entered the market since the Bank rate was cut to a 300-year low in early 2009, many of whom have yet to experience a hike in interest rates,” he said. 
“While we do not expect interest rates to rise until mid-2015, borrowers should be prepared for the prospect of interest rates increasing back to normal levelsî.
This was a sentiment shared by Howard Archer of IHS Global Insight who called for the Bank of England to adopt a reactionary approach and consistently monitor the property landscape to prevent any new complications arising in the 
bolstered housing market.
Mr Archer said: The strong monthly rises reported by the Nationwide and the Land Registry will maintain concern that a new housing bubble could really develop in 2014, especially as the strength in house prices is spreading.
“At this stage though, only the pace of house price rises in London is really a serious cause for concern.”
The Bank of England announced earlier this month that they would be refocusing the finance from their Funding for Lending scheme away from the property market and into small business lending in order to stop the property market 
They have also remained hinged on their stance about premature interest rate rises, and are thought to be waiting till 
wages improve before considering any steady increase. 
However, the reality is that more will have to be done to tighten the mortgage acquisition procedure in order to prevent those who do not have ample finances to cope when rates do rise, because the reality is that they will rise sooner rather than later and could have a significantly damaging affect on what is a far more positive housing market. 

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