Help to Buy
UK house prices are rising thanks to a reviving housing market and weak supply, but first time buyers pay the most of all

First time buyers are bearing the brunt of spiralling house prices.

According to the Office for National Statistics (ONS), first time buyers paid 10% higher on average for a home during March 2014 than the same month a year before.

That compares with an annual rise of 8% in the price of an average home, to £252,000. And owner-occupiers only paid 7.1% more on average for a new property over the year.

House prices are rising across the UK because of a revival in housing demand and a severely constrained supply of new homes.

Ultra-low interest rates, schemes such as Help to Buy to make mortgages cheaper, and the strengthening economic recovery are all key factors in pushing up demand. In London, flows of foreign investment in property are also pushing up housing demand.

But the government's own estimates show how far short the supply side is falling. It puts the annual need for new homes at 290,500 until 2030.

House building levels are currently running at a rate of around 145,800 a year, though they are increasing.

Attempts are being made to limit riskier mortgage lending. New rules for lenders with tougher affordability tests for borrowers were imposed by regulators at the end of April.

Interest rates are set to rise in early 2015 as the Bank of England grows more confident in the strength of the economic recovery and looks to hike its benchmark rate from its record-low 0.5%.

This will increase the cost of a mortgage and apply the brakes slightly to housing demand, which should in turn hold down price growth.

And the Bank of England's Financial Policy Committee, which has broad powers over the banking sector, stands ready to tighten credit conditions if it sees any sign of a bubble forming.

Average House Prices in Countries and Regions

Average prices in March 2014 stood at £263,000 in England (+8.5%), £164,000 in Wales (+4.9%), £132,000 in Northern Ireland (+0.3%) and £181,000 in Scotland (+0.3%).

In March 2014, London continues to be the English region with the highest average house price at £459,000 (+17%) and the North East had the lowest average house price at £148,000 (+4.1%). London, the South East and the East all had prices higher than the UK average price of £252,000.

Excluding London and the South East, the average UK house price was £195,000 (+4.7%).

Source: ONS