A major lender forecasts that house prices will increase up to 8% by the end of the year. They are also stating that other major lenders are agreeing with the prediction and at the very least the increase will finish on 4%.

 

The lender stated that from January to November last year house prices across the UK had risen by 7% putting up the average price of a home at £174,910. If as predicted the 8% increase occurs then the average house price will become £188,912, however this is still £10,000 less than the high experienced in November 2007 when it rose to £199, 612.

The chief economist for the lender, Martin Ellis said:

 

"Despite the recent gains, house prices remain 12% below their August 2007 peak, and transactions in 2013 are still around a third below the average for 2006 and 2007.

"House prices are also lower in relation to earnings, with the average price currently 4.8 times average annual earnings compared with a multiple of 5.8 in 2007. There is little sign of the excessive behaviour associated with a house price bubble at present.

 

"The authorities, primarily in the form of the Bank of England's financial policy committee, are also on guard to implement measures to dampen the housing market should signs of overheating materialise."

The lender agrees with the Prime Minister that the Help to Buy scheme will not cause inflated house prices, however there is an increase in the demand for new properties and with things turning round in the economy this will cause house prices to rise between 4%-8%. The only way to stop this would be by providing large numbers of new builds.

So far 6,000 people have successfully applied for mortgages under the Help to Buy scheme and David Cameron denied the impact of causing a house price bubble as in many parts of the country prices were "barely moving at all".

Cameron said,“The New Year is often a time when people look to make those big life-changing decisions like moving home or taking that first step on the housing ladder.

 

“But too many people have found themselves frozen out of the market in recent years as a result of the size of the deposit required. That is why as part of our long-term economic plan we introduced the Help to Buy scheme, so hardworking people with sufficient earnings can get on, fulfil their aspirations and enjoy the security of owning their own home.”

As far as Cameron is concerned the surge in demand will not bring untenable house prices. .

The Prime Minister said: "Where we are today, house prices are still way below the peak they reached in 2007,

"Forecasters do not think they will get back to the level before the crash even in 2019. So there is no evidence of a problem.”