The gloom and doom predictions for the housing market and perhaps even the UK economy could instead have a more optimistic outlook. The online property listing platform, Rightmove, has reported that there was a £3,000 increase in the housing market’s average house price. The new average house price is therefore at £365,357 in March. It is a minor but significant increase as it comes while much is unsteady about the economy and the housing market.

Interest rates have increased in only a little over a year from almost zero at 0.1% to 4.0% as the Bank of England’s Monetary Policy Committee (MPC) has battled inflation growth into double digits by hiking the standard base rate. The higher cost of borrowing has not only made becoming a homeowner more expensive, but put homeowners in financial instability as many face repayments that are unaffordable.

The spring season normally sees a bit of a buyer’s boost in the market, and the recent increase 0f 0.8% is lower than the usual minimum average 1.0% spring spike, but it an increase nonetheless and offers some optimism for home sellers. It is also an optimistic outlook for homeowners that have been in danger of seeing their property values decline and risk negative equity.

The increase cost in home buying has seen an average five year fixed interest rate mortgage of last year below 2.5% rise to over 4.5% at the same time this year. Such an increase can have a major impact on the home buyers offered repayment levels and has for many shut them completely out of the market. It also has required those that wish to get on the property ladder to lower the risk of the lender and put up higher deposit amounts to qualify for more affordable rates.

The loan to value (LTV) level is important criteria for lenders in home buying approvals that is often overlooked and perhaps little understood. In simple terms, the lender is determining if the risk of the loan is viable and is comparing the value of the property to the amount of the loan. The more the value is above the loan amount, the better opportunity to be approved and the better interest rate offers from lenders. A higher deposit takes down the need for the loan amount and thus pushes the risk down for the lender.

For instance, if the loan is valued at 95% of the property value it is more risk for the lender than if the loan was valued at only 80% of the property value. For homeowners, if the property value has increased due to upgrades or improvements, the homeowner could discuss the value with the lender. Home buyers could offer a higher deposit to take the loan amount down to only 80% of the property value.

Homeowners also face the LTV issue when it is time to remortgage. At the end of the homeowner’s mortgage term, they could remortgage or be moved to their lender’s standard variable rate (SVR). A SVR is usually higher than the interest rate offered with a remortgage. To save money and not pay more than necessary, a remortgage offers savings from a risky SVR and if it is a fixed rate deal it shields the homeowner from further rate hikes.

Property values have over the past few years been climbing. This helps remortgaging homeowners not only qualify for a remortgage, but also better deals with lower interest rates. However, when property values decline it can not only strip away built up equity in the home, but also put newer homeowners into negative equity where they owe more money than the property is worth.

The resilient housing market news is following other offers of optimism. Perhaps we have avoided a recession, and inflation may be almost at target 2.0% by the end of the year. Now, with the latest news of a small increase in the average house price, it could give homeowners a life preserver from going under water with negative equity and offer more time to grab an attractive remortgage deal to save money in the years ahead and offer peace of mind as further rate hikes could be needed to reach the inflation target goal by year end.