What happens if Skelmersdale house prices go up?

In my last article I spoke about what happens if house prices fall, however whilst house prices going up is generally seen as a great thing, this itself can pose some challenges, depending on what situation you're in.

If you buy something today and the value of your house increases, then you, clearly, are a winner!

However, the thing to remember is that house prices all tend to rise and fall at broadly similar rates, save for pockets here and there, and if your home has risen in value by, say 10%, then it's often the case that the home you want to buy has also risen by about 10%.

In real money, this means that if your £100,000 home is now worth £110,000, then that £200,000 home you had your eye on would now be worth £220,000, meaning you're spending an additional £10,000 to acquire it. Saying that, if house prices are rising broadly in line with inflation and not outpacing it, the difference is neither here nor there.

Gently rising house prices are always a good thing, though. It means you avoid the negative equity scenario, and this, coupled with your mortgage balance decreasing, means that with each passing year, you're worth more on paper.

Rising house prices, though, can have an unpleasant side, especially if you're a first time buyer. Compared to previous generations, current first time buyers have it tough; in 1996, my first house (which was a wreck, to be fair, so I got it fairly cheap) cost me £19,000 and I bought it with a £950 deposit. In the 1970s, the average house cost about three times the average wage and the loan for it could be obtained by putting on a suit and having a friendly chat with your local bank manager.

By contrast, today's first time buyers often need a deposit not dissimilar to my first purchase price, and the mortgage application is a bit like competing on an episode of the Krypton Factor.

That's why, if you're looking to buy and are in a position to, there is a strong argument against waiting - either for the "right time" (because there isn't one), or for prices to fall, because they may go the opposite way.