Should I Buy a House Now or Wait?

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Despite house prices rising over the past couple of years, making it harder for some people to buy a home, there are several schemes to ease the burden. The government’s Help to Buy scheme was available to first-time buyers until October 2022. When the scheme ended, first-time buyers could access other support, such as the government’s Shared Ownership scheme or First Homes scheme. However, trends indicate that house prices are now beginning to fall and will continue to do so.

Deciding whether now is the best time to buy a house or wait can be tricky, especially when each person’s situation is different. It’s also very hard to predict what may happen to mortgage and interest rates, so the big question is: should you hold off or bite the bullet?

The Current Housing Market

Halifax’s UK housing market review and outlook for 2023 shows that house prices fell by 2.3% in November. The fall is the most significant since October 2008 and the third consecutive decline in house prices. Meanwhile, the Office for Budget Responsibility (OBR) predicted prices could drop 9% by 2024 before rising again in 2025. The decline in house prices is mainly due to the cost-of-living crisis and rising mortgage rates, which are tightening households’ finances. When interest and mortgage rates are high, demand falls, so house prices are lower.

According to Nationwide, the average property price in November 2022 was £262,788, which is 9.1 times the average person’s salary, whereas, in 1997, properties cost just 3.5 times the average person’s earnings.

When buying a house, you need to consider your situation and reasons for buying to determine the best decision. Whether you plan to buy as an investment or as a short-term project depends on when the best time to buy a house is. For example, if you buy a home as a short-term project with plans to sell in the near future, you could face the risk of a dramatic drop in house prices in the next couple of years, which could wipe out the value of your deposit and leave you in negative equity. Although putting down a large deposit will lessen your chances of negative equity.

However, if you’re planning to buy a house as a long-term investment and stay there for many years, you will more than likely ride out the wave of the potentially declining house market and not face the risk of negative equity. Regardless of what you think you might want to do, plans and circumstances can quickly change, so it is tough to plan far into the future.

Mortgage and Interest Rates

After two and five-year fixed mortgage rates peaked at 6.65% following the Kwarteng-Truss mini-budget, at the beginning of 2023, a two-year fixed mortgage rate was hovering around 6% and a five-year fixed mortgage rate around 5.78%. So, while the figures have dropped, they are still considered high compared to pre-pandemic rates. Again, this is all to do with the cost-of-living crisis and inflation rate.

The Bank of England continued to raise the base rate to 4.00% to curb rising inflation, despite it already being at its highest level since 2008. So even though house prices are lower, the rising mortgage rates could cancel out any savings.

Since the end of the Help to Buy scheme, first-time buyers have been looking for Help to Buy alternatives, one of which is a 95% mortgage. However, you may need to consider a smaller deposit, and a larger mortgage means you’ll pay back more each month due to the current high-interest rates. Despite this, the multiple lockdowns mean some people may have found themselves with unexpected savings and can afford a larger deposit or slightly larger monthly mortgage payments.

Whether you are a first-time buyer or not, it’s crucial to consider your personal situation and finances to choose the best mortgage that suits your affordability. Familiarise yourself with the different types of mortgages to select the most suitable funding option for your property transaction.

The Best Time of Year to Buy a House

Typically, March is a good time to buy a house, as conveyancers advise most people to put their homes on the market after the winter slump. Spring is also a good time to buy, as the housing market tends to boom, so you’re more likely to get a deal. The housing market tends to slow down during the summer months, especially in August when people go on summer holidays. The market then tends to pick up again in September and October before coming to another halt in winter. The downside to buying when fewer properties are available is that you may have to pay more to beat other buyers.

If you’d like to discuss this topic more and explore your options with an expert, don’t hesitate to get in touch or get a free quote.