House prices continue to rise and that has put more fuel onto the fire of a possible housing market bubble brewing.  According to the latest information from Halifax, Britain’s largest mortgage lender, there was an increase of 3.9%, or £7,000, added to the average house price in the UK in May.  That increases the average house price to £184,464.  This level has caught many experts by surprise with such a large monthly increase.

Some economists have cautioned that the data may simply be a one-time jump for May and that there is still the possibility of the housing market normalizing itself without the need for government to intercede.  Others believe that should increases continue on the same level months ahead that there will be changes required such as the elimination of the Help to Buy scheme or a look at increasing the standard base interest rate by the Bank of England’s Monetary Policy Committee (MPC).  Last week, the MPC voted to leave the rate at the historical low 0.5% another month.

While the month to month increase was much more dramatic, the quarterly increase was perhaps a more insightful look into the stability of the market with only a 2% increase in prices, which was the smallest quarterly increase for the year.

Halifax reported that the strong demand for homes while supply is low is the reason for the growing increases in house prices. 

Stephen Noakes, mortgages director at Halifax, said, “Demand is still strong and continues to be supported by a strengthening economic recovery.  However, there are signs of a revival in housebuilding, which should bring supply and demand into better balance and curb upwards pressure on prices over the medium and longer term.”

The increase in house prices is supporting homeowners and the newly gained equity is making the decision for a remortgage much more attractive.  It has been reported that many homeowners are actively checking on property listing sites to find out an estimated value of their own homes.  Some reported checking weekly and even daily as to the increase of their homes.

While lenders are adjusting to the still under 60 day old new guidelines for mortgage lending with the Mortgage Marketing Review, the process for a remortgage may take more time for borrowers.  However, the offset to the longer processing time is that there are still cheap remortgages to be found on the market.