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Affordability worries mount as new asking prices hit record highs and Bank sounds warnings

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Wed 21 Mar 2018

Affordability worries mount as new asking prices hit record highs and Bank sounds warnings

New asking prices have hit record highs this month, jumping by 1.5%, with 5% fewer properties coming to the market compared with this time last year.

Meanwhile the Bank of England has warned that as the house price boom continues, borrowers are stretching their incomes as never before to buy properties, with more than 27% borrowing more than four times their annual income. This is the highest figure ever and double the ratio of eight years ago.

Rightmove this morning reports that typical new asking prices for first-time and second-stepper properties have hit all-time highs of £189,840 and £272,031 respectively.

The overall average asking price of newly-marketed property jumped by 1.5%, the largest increase for this time of year since 2007.

The portal said the price rise was also exacerbated by a dip in supply, with 5% fewer properties coming to market compared with the same period a year ago at 112,693.

First-time buyer properties, those with one or two bedrooms, have hit an average of £189,840 – 0.5% higher than their previous high seen in June 2017.

Second-stepper properties, with three or four bedrooms excluding four-bedroom detached, are now coming to the market at an average price of £272,031 – 0.9% dearer than their previous high recorded in October 2017.

However the use of averages hides significant regional differences with overall average asking prices hitting highs in just four out of 11 regions.

Time on the market has fallen, with properties taking 65 days to exchange this month, compared with 72 in February, while average stock is 43 properties per agent.

Miles Shipside, Rightmove director and housing market analyst, said: “It remains to be seen if this month’s 11-year price rise high for March is a catch-up anomaly after two more subdued price rise months, or an early sign of price pressure building up a real head of steam as we enter the spring market.

“Either way, sellers need to be mindful of increasingly stretched buyer affordability, and the more they increase prices the more buyers will hit their ceiling on the amount they are able to save for a deposit and borrow for a mortgage.

“There does however still seem to be potential price headroom in parts of the country, especially in some of the regions in the north, and in the more mass-market sectors.

“However, sooner or later higher prices tend to mean fewer people can afford to move.”

Separately, the Bank of England says there has been a sharp rise in borrowing at four to four-and-a-half times annual earnings. A total of 17.65% of mortgage lending was at these levels  in the third quarter of last year, and a further 10.65% of mortgages went to borrowers at higher levels.

Former business secretary Sir Vince Cable, leader of the Liberal Democrats, said: “This is very reminiscent of the dangerous times of a decade ago when banks and building societies were lending far beyond reasonable limits.”

Banks are not allowed to hand out more than 15% of their total lending to mortgage customers wanting to borrow over four-and-a-half times income. The Bank’s concern is the sharp rise in lending at just under this level.