The boom in house prices this year within the UK housing market is causing some property firms to completely change their outlooks for the year 2015.  For example, the average cost of a property is so high now in London, due to increases from this year alone, that the market could experience no growth in the year 2016, just one year following next year.  This is abnormal due to the expected growth of house prices expected this year which only totaled about 8.5%.

Savills head of residential research Lucian Cook sees this as a product of other factors occurring in the market at the same time.  He believes low interest rates have made quite an impact on house prices and that in turn has created more demand within the market.  The combination of positives has almost created an environment which is too fertile for activity.

Cook went on to say: “These extraordinary rates of house price growth cannot continue in the current, more regulated mortgage environment, particularly in the face of likely interest rate rises.”

Cook added: “Higher interest rates would increase the risks in sectors of the market where borrowers have taken on high levels of mortgage debt relative to income, but it is difficult to see this as a catalyst for a wholesale housing market correction, rather we anticipate a slowing of growth, particularly in London and the south.”

Remortgages also remain quite popular within the market.  This is occurring due to the change in base rate which could be happening sooner rather than later based on the last MPC meeting.