Professor David Miles, a member of the Bank of England’s MPC, has said that the ageing population coupled with the growing number of immigrants will fuel a boom in house prices.

He pointed out in his research paper that first time buyers will be older due to the stricter contractor mortgage lending criteria imposed since the recession. Increasing real incomes and the probability of rising population density points to real house prices following an upward trajectory in the future.

This scenario is particularly likely to happen in countries like the UK where the population is set to increase rapidly. One in six of the people currently living in the UK is expected to reach the age of 100 and the population is also set to increase.

According to figures from the ONS, the UK has a current population of 62.2 million, but that is expected to rise to 67.2 million by the end of this decade and reach 71.4 million by 2030.

In the last 25 years, property prices have increased to levels beyond the means of many people. In 1986, the average property in one of Britain’s cities cost £35,209. Today a comparable property costs about £170,000.

Miles believes that stricter lending criteria are here to stay and this means first time buyers will need larger deposits. The average age of first timers will increase and the percentage of owner occupiers will decrease.

He ended up by saying that insisting on larger deposits was not a bad thing and it did not make sense to offer the 100% mortgages that were readily available during the housing market boom years.

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The news that it’s still cheaper to buy than to rent in most areas of Britain could prompt freelancers to rush out and shop for a contractor mortgage.

House prices have been rising recently but according to Zoopla.co.uk, buying remains the cheaper option in 42 out of 50 top British towns and cities. Average asking prices now stand at £255,037 – £6,500 lower than this time last year, whilst the average monthly rent was £1,470 in February.

If you live in Milton Keynes, it costs a whopping 38.8% more to rent than to buy. Of course the town is near to London and as such is popular with commuters.

At the other end of the scale, people living in Cambridge, Oldham and Swansea will find their yearly rent bill is between 4.6% and 8.4% less than their neighbour’s average mortgage annual repayment.

Although a lot of people cannot afford to buy a property in London, doing so is still cheaper than renting. The average 2-bedroom flat in London costs £452,387, but renting the same property would set you back £2,422 a month. In fact renting in the Capital could cost as much as £6,687 a year more than if you were repaying a mortgage.

Nicholas Leeming from the property website pointed out that although we have witnessed an increase in activity from first time buyers, there is still a high demand for rental properties and this has pushed rents up to historic highs. We have historically low interest rates and this should be the perfect time to buy. The only thing holding a lot of people back is their inability to get a mortgage.

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People with a contractor mortgage who follow the housing price indices will be pleased to learn that prices in the first quarter of this year have increased at the fastest rate in six years.

According to the latest survey from Rightmove, typical asking prices now stand at £236,939, an increase of 4.9% since the start of 2012.

House prices in the Capital currently average £455,159, a 7.3% year on year increase and the average asking price for a home in Kensington and Chelsea now tops £2 million for the first time ever.

Whilst all areas of England and Wales saw prices rise in March, year-on-year decreases were reported in the Midlands, North West and Wales. Home owners in the West Midlands have seen asking prices drop to £181,925, a decrease of 2.9%, over the last 12 months.

However, Rightmove warned that the housing market recovery is still patchy and low transaction levels leave the market sensitive to external influences.

First time buyers have seen the stamp duty exemption removed and prices for flats and terraced properties are now about 3% higher than they were this time last year. On top of that, they need a large deposit to secure a contractor mortgage and lending institutions have started increasing their rates.

Whilst the NewBuy scheme may go some way towards helping first time buyers, people moving home still have to face a multitude of problems. Some people have suggested that sellers will accept a lower price to compensate for the removal of the stamp duty exemption, but many second steppers will not see this as a viable option.

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Peter Dockar, the head of mortgages at HSBC, said recently that a lot of first time buyers are naïve and more interested in buying a property in a trendy area than making sure their investment is structurally sound.

People looking for their first contractor mortgage should think beyond their immediate desires or they could face financial problems further down the line.

HSBC recently surveyed first time buyers and discovered that only 5% took subsidence into consideration and only 6% thought about the cost of modernising a property when looking at house prices. Apparently only 33% of estate agents also consider this to be an important factor.

First time buyers make a serious financial commitment when they buy a home and it is essential that they weigh up all the potential costs before they make the decision to purchase their biggest asset.

There is another area that first time buyers do not seem to consider and the HSBC survey did not cover this. Mortgage lending companies are offering various incentives to entice people to buy now, but if house prices keep on falling, first timers could quickly find themselves in negative equity. Buying a property with only 5% to put down as a deposit can be a risky business.

The best mortgage rates are generally only available to people with a large deposit and although estate agents won’t point it out, first time buyers need to be aware that getting a 95% LTV mortgage could lead to other problems further down the line.

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First time buyers may have heard of the news about the NewBuy Guarantee scheme and be wondering whether they can obtain a cheap contractor mortgage through it.

The NewBuy Guarantee scheme aims to provide people with small deposits a competitively priced mortgage as long as they purchase a newly built property. The Government hopes this will stimulate demand for new homes, kick start the housing market and provide much needed work for the construction sector.

However, critics of the scheme are concerned that young people will be encouraged to take on debt they can’t really afford and find themselves with negative equity if house prices continue to drop.

First time buyers wanting to take advantage of the scheme will only need to find a 5% deposit. The majority of banks currently ask for at least 10% and the really competitive deals are only available to people who can put down a 20% deposit.

The scheme is only available to buyers in England and they must be purchasing a newly built property from a developer who has signed up for the scheme. The property has to be your main residence and cost less than half a million pounds. Only British citizens will qualify and you must have saved for the deposit without the help of a public or local authority.

Barclays, NatWest and Nationwide have already launched NewBuild Guarantee mortgages and it’s thought the Halifax and Santander will soon follow suit.

NatWest is currently offering the cheapest deal with its two year fixed rate product at 4.29%. There’s also an arrangement fee of £499. Its five-year fix comes in at 4.99% and this compares well with the next best deal, which comes from the Skipton Building Society, at 6.29% plus £195 arrangement fee.

Whilst the NewBuy Guarantee will help people get their first foot onto the property ladder, the fear of plunging into negative equity may put some first time buyers off.

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While many contractor mortgage holders have seen the value of their property decrease over the last few years, owners of homes in spa towns have seen an average increase of almost £130,000 in the last ten years.

The Lloyds TSB Spa town review shows that average house prices in 18 spa towns increased from £146,194 in 2001 to £275,397 last year. That represents an 88% rise and equates to a monthly increase of £1,077.

Epsom is the most expensive of the spa towns with the average house costing £339,231. Tunbridge Wells ranks second with house prices averaging £326,753. 50% of spa towns have average house prices exceeding £250,000.

Ilkley was found to be the most expensive spa town outside southern England. Average house prices in the Yorkshire town are £293,338. At the other end of the scale, the average house in Llandrindod Wells will set you back a mere £155,469 and one in Builith Wells – £183,050.

Despite propping up the bottom of the table, Llandrindod Wells has seen house prices increase by 109% over the past decade. The rise in Builith Wells is an even more impressive 170%, whilst the North Yorkshire town of Harrogate has seen prices increase by 107%.

Houses in spa towns are fast becoming out of the reach of the average worker. Last year, they cost an average 8.3 times gross yearly earnings.

Suren Thiru, a Lloyds TSB housing economist, explained that properties in spa towns still attract a substantial premium over those in neighbouring areas but the housing market conditions in these areas have got tougher over the last ten years, especially for first time buyers.

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It’s not only first time buyers who have been struggling to get a contractor mortgage in recent years; first time sellers have also had problems.

Lloyds TSB recently conducted a survey that found “second steppers” who long to upsize are stuck in accommodation which is no longer suitable. A lot of these people bought when prices were high and may now be in negative equity. A lack of buyers and the additional costs associated with moving home are also holding others back.

Lloyds’ research findings suggest that 61% of second steppers wanted to move to a larger home over the last 12 months. 20% of second steppers think it’s harder to climb to the next rung of the housing ladder than it was to get on it originally.

Stephen Noakes, Lloyds TSB’s mortgage director, said home owners selling for the first time face some tough challenges and it is important for this group to receive more support as they have a vital role to play in making the housing market move again.

Another study, this time from HSBC, found that falling house prices and tough mortgage lending criteria have prevented 360,000 home owners from moving up the housing ladder.

Although a lot of these are not actually in negative equity, they do not own enough of their home to fund a 10% deposit, stamp duty and other expenses. The problem has been made worse because typical first time buyer homes have decreased in value at a faster rate than other properties.

HSBC’s head of mortgages, Peter Dockar, pointed out that people who are already in their first home can no longer depend on rising house prices to fund the deposit for their second.

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People with a contractor mortgage may be interested to learn that the debate about the controversial mansion tax is hotting up in the run up to this month’s Budget.

The Lib Dems want George Osborne to introduce a mansion tax on properties valued in excess of £2 million. However, according to a Sunday newspaper, the Treasury has ruled out the plan as it would be expensive to introduce and could lead to legal challenges against the government.

Nick Clegg has repeatedly called on the government to increase the personal income tax allowance to £10,000 and the mansion tax would fund that proposal.

The government has also recently discovered a tax loophole whereby properties are placed offshore to avoid stamp duty. Still on the subject of stamp duty, the UK200 Group recently commented on the way homeowner envelope their properties to avoid the 5% stamp duty charge on house prices above £1 million, and instead paying only 0.5% duty.

Meanwhile, first time buyers are rushing to beat the stamp duty holiday and estate agents reported a 18% increase in registrations last month. However, Hometrack has acknowledged that this is an artificial increase.

Demand in the housing market is now exceeding supply and 92.9% of sellers achieve their asking price. In fact supply has only increased by 1.5% over the last six months and yet last month alone saw a 28% increase in the number of first time buyer enquiries in the South East.

House prices in Greater London managed to increase by 0.1% in February, the only region to register a rise, whilst they fell by 0.3% in the North East.

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Whilst British first time buyers have been finding it hard to get a contractor mortgage, it’s been a different story in Northern Ireland.

The CML says that Northern Ireland saw an increase in the number of home loans granted in the final quarter of last year. Mortgage lending companies granted 2,500 homes loans, up by about a hundred, as falling house prices made homes more affordable.

Derek Wilson, the chairman of the Northern Ireland branch of the CML, said the increase was a welcome confidence booster for the Northern Ireland housing market. Economic uncertainty and a lack of job security had meant that people moving home had stopped looking for mortgages.

In 2011, a total of 8,800 mortgages were taken out for house purchase. This was an 11% drop on the previous year. However, there was a 1% increase in the number of remortgages.

Mr Wilson also said we needed to find ways to reverse consumer’s negative feelings and encourage confidence.

Tom McClelland from the RICS thinks the increase in mortgage lending at the end of the year could have been due to the busy summer period. We still have a bumpy housing market, he said. Auction sales are good because prices are low and because there is a large amount of debt, falling house prices make homes more affordable for a lot of people.

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Roger Bootle, the founder of Capital Economics Ltd, had some reassuring news for people with low-interest rate contractor mortgages recently when he said it will be years before the Bank of England raises the base rate.

He reckons it will take nearly 10 years for consumer spending to return the level it was prior to the recession.

The Bank of England MPC has once again kept the base rate at 0.5% this month as the housing market remains in dire straits. House prices in London have been supported by a lack of supply and buoyant overseas demand, but across the rest of the UK, prices have fallen.

Bootle explained that it is going to get harder to obtain a mortgage and with rising unemployment the housing market will face two negative influences. The housing market will probably stagnate as consumer assets decline.

Interest rates will have to get back to normal eventually, he pointed out, but if the housing market is collapsing when rates are at 0.5%, what will happen when the base rate increases to 5%?

However, some Brits still view residential property as a good investment. Stuart Law, the chief executive at Assetz, said people realise the housing market is stable and as long as employment remains stable, house prices will do the same.

Sellers raised asking prices in February by an average 4.1%, he pointed out. However, this could be to give themselves room for negotiation as buyers look to strike the best possible deal.

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A new study by Collins Stewart suggests that the UK housing market is on course for a “lost decade” and the coalition’s proposals to boost contractor mortgage lending could backfire.

If that were to happen, house prices will fall and first time buyers could be left with negative equity. The company has now warned that house prices will continue to fall for the next two to three years.

One of the problems, according to Collins Stewart, is that the government keeps talking about a structural shortage of homes in the UK. Politicians say we are only constructing 50% of the 240,000 homes that are needed every year.

However, the evidence behind that is flimsy and in fact the Collins Stewart study says we have been building at twice the rate of population growth over the last 20 years. Furthermore, the UK is building around 11,000 “hidden” homes each year that are not included in the construction figures but are known about by the tax authorities.

Alastair Stewart, an analyst at Collins Stewart, went on to say that periods of extensive house price inflation are usually caused by an over-supply of capital rather than a lack of housing. The buy to let boom in the North last decade was a prime example.

Buyers and sellers alike have been sitting tight recently waiting for some sort of good news to come out of the housing market. Every now and again we see some green shoots but if Collins Stewart is to be believed, it’ll be a long time before we’re out of the woods.

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The housing market has received a welcome boost as sellers increased house prices by 4.1% last month, the largest month-on-month rise since 2002.

Rightmove has discovered that sellers are now typically asking £233,252 for their properties. Sellers could be becoming more confident due to a dearth of properties for sale in affluent areas.

The average asking price in London now stands at £449,252, but the number of properties has dropped by 9% on this time last year. This lack of supply could well push prices up even further.

Rightmove also pointed out that the housing market has split into micro markets, each of which performs very differently. London still receives a lot of demand from overseas buyers and the strength of sales in the Capital is at odds with that in the majority of the country’s regions.

However, miles Shipside from Rightmove said potential buyers seem to be more positive this year. In fact 60% of them think it’s a buyers market.

Last October, each estate agent had an average 75 unsold properties on their books. That has now dropped to 67, suggesting that buyers are eating into the supply. The property website also said search activity reached record levels last month.

Rightmove’s research also found that there were more contractor mortgage deals available for first time buyers. The number of 90% LTV home loans is up by around 33% on this time last year.

However, it is widely believed that mortgage lending institutions will further tighten lending criteria this year. The stamp duty holiday also comes to an end next month, so first timers will still have hurdles to face before they can get onto the property ladder.

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