The average house price in the UK has increased from £271,000 to £287,000 in the past year, according to the Office of National Statistics (ONS), a year on year increase of 7%.
This could leave millions of home owners with a nice Christmas gift of around £16,000 extra equity in their home.
Location, location, location
But the amount house prices have risen varies considerably by area, average house prices reached around:
- £530,000 in London (up from £504,000)
- £300,000 in England (up from £283,000)
- £174,000 in Wales (up from £172,000)
- £196,000 in Scotland (up from £194,000)
- £158,000 in Northern Ireland (up from £137,000)
Why have house prices risen?
The December edition of the ONS House Price Index report states that house price rises are being driven by lack of housing supply, with the construction of new homes down 1.7% year on year.
Coupled with this has been a strong demand for houses, possibly off the back of government commitment to the Help to Buy scheme, which will be expanded after April 2016.
There may also be a link with the announcement that anyone buying a second home after April 2016 will face an extra 3% Stamp Duty charge, whether it’s for a holiday home or a buy-to-let property, causing a temporary drive to buy property before it comes into effect.
Borrowing against the value of your home
Equity is the share you own of the value of your home. The value of your home going up is one of the ways you can increase your equity, the other is to pay down your mortgage debt with a repayment mortgage (but not an interest-only mortgage).
It’s relatively common to borrow against equity by remortgaging to get a cash lump sum, whether to pay for home improvements that can add more value, retirement, weddings or other expensive things.
Our guide on equity and how to use it for borrowing explains more about what you need to know, as well as what to watch out for.