Over the years, properties have become more and more expensive. If you speak to your parents or grandparents, they likely paid a fraction of what house prices are nowadays when they first purchased their own home. This has made it much more difficult for people to get on the property ladder and houses are less affordable than they were a decade or two ago. 

Although house prices are rising, purchasing a property is still cheaper in the long run than renting and it’s always worthwhile trying to get on the housing ladder. If you’re in the process of looking for your first home and you’re concerned about the rising house prices, below our team of mortgage advisers have put together some information you may find useful. 

What’s happening to the property market?

According to the latest Rightmove House Price Index, the average price of property has risen by 0.9% (+£3,398) in October to a new record of £371,158. For many first-time buyers, this average house price is simply unaffordable and first-time buyer demand is down by 21% when compared to this time last year. 

Experts expect house prices to drop in November and December, as they usually do each year, and there is a chance that first-time buyers may be able to find properties within their budget as we head towards 2023. The uncertain economy is still a concern for many though and it is making it difficult to predict what next year has in store for house prices. The repercussions of the Government’s mini-budget are still to unravel too and there may be more changes to come to the housing market in the near future. 

How to get a mortgage when house prices are rising 

Not only are house prices rising, but interest rates are rising too and getting a competitive mortgage has become more difficult, particularly in the last month. Unfortunately, when applying for a mortgage now, you would have to borrow more to purchase the property you’re interested in and due to higher interest rates, you would pay back more over time as well. That being said, there are a few things that can help first-time buyers get a mortgage even though house prices are rising. 

Speak to a mortgage adviser 

It’s highly recommended that all first-time buyers speak to a mortgage adviser before searching the property market for a new home. A mortgage specialist can give you an indication of how much you’re able to borrow in the current financial climate and this is incredibly helpful when you’re searching the property market. 

Some mortgage providers removed mortgage products from the market immediately after the mini-budget was announced, but they are gradually starting to release new mortgage products for buyers. When you speak to mortgage advisers, they can review the mortgage market for you and help you to find the best mortgage offers. They can also tell you more about the different help-to-buy options available that could help you to get on the property ladder. 

Check your credit score 

All mortgage lenders have their own mortgage affordability tests, also known as stress tests, and they would undertake checks before offering you a mortgage. These tests are designed to ensure borrowers would still be able to meet their monthly mortgage repayments, even if their circumstances change or interest rates rise again over the period of the loan.

Several factors impact the outcome of mortgage affordability tests, one of which is your credit score. Having a good credit score could help you to get the mortgage you need and it’s key to check your credit score before applying for a mortgage. There are a few things you could do to improve your credit score too and it’s worth looking into these in more detail.  

Consider a lower LTV 

Loan to Value (LTV) refers to the ratio between the loan amount and the value of the property. Most mortgage lenders have a minimum LTV of 95% and you would be required to put down a deposit of 5%. However, you are often considered ‘high-risk’ to lend to when you have a high LTV and ultimately, it would cost you more to borrow the money you need. 

Whilst this isn’t an option for everyone, if you have some additional savings that you could put towards your house purchase, this could be advantageous. Having a higher deposit would lower your LTV and this could help you to get a more competitive mortgage. You may have more mortgage options to choose from when you have a lower LTV too. 

Getting a new mortgage 

When you’re trying to get a new mortgage deal, don’t hesitate to contact our team at Mortgage Require for some assistance. We can make the process of getting a mortgage completely hassle-free and we offer whole of market, friendly mortgage advice to customers on all aspects of the mortgage market. Regardless of what type of mortgage you need or what your specific requirements are, we will do all we can to assist you.

Jason Carpenter