House Prices Surge as High Demand Meets Record Shortage of Supply

Just as the government launches a new scheme to help people get onto the housing ladder with small deposits, a surge in activity has driven house prices in the UK to a record high.

Property website Rightmove said there was a 2.1% jump in house prices this month, with the average house price now sitting at an all-time-high of £327,797.

A shortage of houses for sale is the main cause of the surge in prices, as home-working during the pandemic is driving many buyers to seek more spacious properties outside of cities.

Estate agents say that many potential sellers are also holding off on sales until they’ve received Covid-19 vaccines - further adding to the shortage of properties on the market.

Banks and building societies will begin offering 95% mortgages from this week under the government guarantee scheme.

The chancellor, Rishi Sunak, said: “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.

“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, monthly data from Rightmove found that the number of properties on the market has fallen to the lowest level ever recorded.

Rightmove’s director of property data, Tim Bannister, said: “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.”

Director at estate agent Cheffins, Richard Freshwater, said demand in his area has been fierce:

“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,” said Freshwater.

Director of research and insight at online property portal Zoopla, Richard Donnell, said: “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.

“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.”