An economic consultancy has warned that mortgage lending restrictions are now even tighter than they were six months ago, a scenario that will not help first time buyers. It will also become even more daunting for first timers if the Bank of England starts increasing interest rates later this year.
However, house prices now stand at their most undervalued since the mid 1990s, according to the latest figures published by Lombard Street Research. Its housing affordability index registered 116.7 in quarter 3 last year, where 100 is the average affordability. The index reached a peak of 118.2 during quarter 2, 2009.
That could be about to change. Rightmove Plc reported on Monday that asking prices rose in January by an average 0.3% to £223,121, following a drop of 3% in December. In London, the price rise was even higher at 1.1%. There are always regional disparities with regards to house prices. In the West Midlands for example, prices rose by 7.4% last month whilst in the North, they dropped by almost 6%.
A spokesperson from Rightmove said fewer properties will come onto the housing market over the coming three months and this will push up asking prices.
The Bank of England kept interest rates at an all time low last week, but banks are still reluctant to lend to people wanting a contractor mortgage. They currently approve less than 50% of the number of mortgage applications that were approved during the 2007 housing boom.
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