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House prices back to pre-crisis values: what does it mean for you?

Find out how rising property values might affect your home

For the first time in a decade, average house prices in all but one region of England have returned to their pre-financial crisis levels, new data from the Land Registry reveals.

The average house price in the UK now stands at £220,094, up 5.6% on the previous year.

House prices peaked in early 2007, before spectacularly crashing during the financial crisis, leaving many homeowners across the country in ‘negative equity’ – meaning they owed more in mortgage debt than the value of their home.

Over the past 10 years, prices have slowly crept back up again, hitting a new peak in early 2017.

We explain how house prices are changing in the UK market and what this means for you as a home owner.

Find out more: use our interactive map to find out how much your house is worth

Housing crisis and recovery

A decade ago, property prices were steadily rising across most parts of the country. The average price in the UK hit a peak in August 2007, at £189,786.

In September 2007, investment bank Lehmann Brothers failed, sparking a crisis that brought the housing market crashing down. The average price fell to a low of £154,452 in March 2009, a decrease of 18%.

Since then, average prices have been slowly recovering. April 2017 – the latest data available from the Land Registry – marks the first month that all but one region of England has an average price above its pre-financial crisis peak.

The North East is the only region that continues to lag behind. Its average house price in April 2017 is £123,234, remaining 11% below its 2007 peak. In the North West, meanwhile, the average house price of £152,765 is now on par with its 2007 value.

London is, perhaps unsurprisingly, the best performer, with prices now 62% higher than their 2007 peak. The South-East and East of England have also roared back to strength, with increases of 32% and 33% respectively on 2007.

House price rises can save you money

An increase to the value of your property doesn’t just mean owning a more valuable asset. The additional equity in your home can help you remortgage to get a better deal.

Say you bought your property for £350,000 and still owe the bank £300,000. If your home grows in value by 20% – so is now worth £420,000 – your equity in the home could be close to £120,000.

That means you could almost qualify for a 70% loan-to-value mortgage, paying lower interest and potentially reducing your annual repayments by hundreds of pounds every month.

As a general rule, buying when a market is low is a good investment strategy, as it indicates that prices may be on the rise. But you need to be careful – in some cases, prices may fall and stay low.

Find out more: Types of mortgage – find out how mortgage deals work

What if house prices aren’t rising in my area?

If you live in a region with where house prices aren’t rising, don’t despair. As you pay down your mortgage, the slice of the property you own will still continue grow, increasing your equity.

Keep in mind that average price growth does not necessarily reflect the value of your home. Changes in your local area, or even your street – like a new rail connection or a supermarket – could give your property a boost in value. Renovations can also drive up the value of your home.

While property has traditionally been seen as a ‘safe’ investment, recent years have demonstrated how volatile the market can be. Prices are never guaranteed to rise, even in sought-after regions like London.

As such, it’s always important to do your research, and make sure you can afford to keep up your repayments over the long-term, no matter how the market moves.

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