The Stamp Duty tax break has continued to turbocharge the residential property market and house prices hit new record highs at the start of the year.
Activity has increased dramatically since Chancellor Rishi Sunak announced that the tax would temporarily be waived for the vast majority of house purchases.
The latest e.surv House Price Index showed the effect of the tax holiday, as the average price in England and Wales reached £330,958 in January 2021.
This figure is 8.7% higher than 12 months ago, when the average price was £304,512. House prices rose by 1.2% between December and January, the report added.
Shift away from London
A shift away from London and commuter towns in the South East was reflected in the underlying data. Excluding London and the South East, the annual price growth was 10.7%.
The fastest price rises were in the South West of England, where prices have risen by 13.9% in the last year. The average property value now stands at £332,844 in this region.
Good news for first-time buyers
First-time buyers have also enjoyed a strong start to the new year, with a sharp rise in the number of small-deposit products.
Data from Moneyfacts found that 117 new 10% deposit loans were launched in the first six weeks of 2021. There are now 277 deals available for these borrowers to choose from.
The number of lenders offering these loans has also increased. Today, 47 different banks, building societies and other lenders will offer 10% mortgages. This compares to just 32 at the start of the year.
However, increased choice has not yet led to lower rates in some parts of the market. The average two-year fixed rate mortgage at 90% loan-to-value has increased by 0.09 percentage points since the start of the year, reaching 3.56%.
But there was better news for first-time buyers looking to fix for longer. The average five-year fix at 90% LTV has fallen from 3.79% to 3.68% in the same time period.
Equity Release: market update
The equity release market has also shown signs of improvement after a fall in activity during the earlier stages of the pandemic. Figures published by the Equity Release Council showed that pent-up demand caused a busy end to 2020 for the sector.
It said that 11,566 new equity release plans were agreed by over-55 homeowners in the last three months of the year, with many of these sales having previously been delayed because of the pandemic.
But despite this stellar end to the year, overall in 2020 there were 10% fewer plans agreed than in 2019. About 11% fewer customers took further advances while 21% fewer made a drawdown from an existing equity release plan.
New users have benefitted from dramatically lower interest rates. The market average for the fourth quarter of 2020 was 4.01%, with the lowest rate available for 2.3%.
Support for borrowers
Banking trade body UK Finance urged consumers to contact their mortgage lender if they are struggling to make their monthly repayments.
Arrears have remained at historically low levels, but this is largely down to banks offering payment support to struggling borrowers.
However, the majority of customers who asked to defer or delay mortgage payments have resumed paying their bills in full, it added.
Mortgage payment deferrals will remain available to consumers until March 31st, although customers will still be able to ask for further tailored support after that date.