With house prices increasing and the cost of living crisis at our heels, you may be torn as to whether or not you should put your house-hunting plans on hold.
One of the most frequently asked questions we’ve had this year from potential homebuyers is whether now is a good time to buy a house. The honest answer? It’s complicated. Whilst now might still be a great time to buy for some, you should never feel rushed into making such a huge purchase.
To help you gain a better understanding of the market right now, we’ve pulled together some top FAQs around house prices and the property market. In this guide, we cover:
- Why are house prices so high?
- Is it better to rent or buy?
- Is now a good time to buy?
- Should I wait to buy a house?
- When will house prices drop?
- What is the best time of year to buy a house?
- Has the cost of running a house increased?
- Is it worth buying a house that needs work?
- Will rising living costs affect my mortgage application?
Why are house prices so high?
The reason house prices have risen so much is a combination of high demand and low-interest rates. This perfect recipe has caused the housing market to boom.
The housing market is actually one of the few industries that have thrived during the coronavirus pandemic. High demand and low housing stock has inevitably forced house prices up, as thousands attempted to move house following a global lockdown.
It’s been incredibly cheap to borrow money in the last couple of years. Low interest rates mean that buyers can borrow more money, therefore making you a more attractive buyer. For example, you can borrow more with an interest rate of 2% than you could with a 7% interest rate, meaning buyers have been able to afford more expensive housing than they had previously.
Is it better to rent or buy right now?
Rent prices are also on the rise. According to the HomeLet rental index, the average UK rent prices reached another record high in February 2022. This means that more of your money is potentially just going into your landlord’s pocket. On the other hand, renting is often quicker, cheaper and more flexible than buying a property.
There’s no right or wrong answer when it comes to renting or buying, as it generally comes down to your personal preference and situation.
If you’re on the fence, we’ve listed the advantages and disadvantages of renting and buying below to help you decide which is right for you.
Advantages and disadvantages of renting
|Advantages of renting||Disadvantages of renting|
|You can serve notice and move when the property no longer suits your needs.|
Moving out of a rental home is quicker than selling.
No maintenance costs.
You can rent a home fully, or partially, furnished.
Getting on the rental ladder is easier, and cheaper, than buying.
No mortgage, legal fees or stamp duty.
|Big upfront costs ie. your deposit.|
Rent can be increased when the lease is up.
Can’t redecorate or personalise your home.
No control over organising maintenance or repairs.
If your landlord decides to sell, you may need to move.
You might not get your deposit back.
You’re paying your landlord’s mortgage.
Advantages and disadvantages of buying
|Advantages of buying||Disadvantages of buying|
|Security of owning your own home.|
You can decorate and personalise your home.
Monthly payments go towards your investment, not somebody else’s.
Full control over maintenance and repairs.
If property prices increase, you’ll make money when it comes to selling.
|Saving a deposit can take a while. |
You may need to pay stamp duty.
You’re responsible for any major repairs.
If your home’s value drops below your mortgage’s LTV then you’ll be in negative equity, which makes remortgaging difficult.
Selling a property can be a slow process.
Is now a good time to buy a house?
It’s no secret that it’s more expensive now to buy a house than it was pre-Covid. The housing market is one of the few industries to benefit from the pandemic, with prices increasing rapidly throughout 2021. Now we’re starting to see interest rates also creeping up. As a result, many homeowners are already remortgaging into new fixed deals to take advantage of the lower rates still available.
Rising interest rates will impact the housing market, making it more expensive to borrow money and, therefore, harder to find a cheaper mortgage deal. That being said, if you can find a deal to suit you and a property that you love and can afford, then yes, now is a good time to buy a house.
Should I wait to buy a house?
Whether or not you should wait to buy a house depends entirely on your current circumstances. House prices are only going to keep rising for the foreseeable future, so if you already have your deposit, funds to cover legal fees and have found somewhere you like, then now could still be a good time for you to buy.
Some people are holding off in the hopes that house prices do dip, but there’s no way to know when/if that would happen. Plus, if property prices come down too much, there’s likely to be even less choice for buyers, as homeowners would choose not to put their homes on the market.
One thing we can take from the pandemic is that the housing market is very resilient. So, if you’re concerned about your investment, perhaps consider the following during your house hunt:
- Were houses in the area steadily increasing in value before the pandemic hit?
- Are you near good schools?
- What are the transport links like?
- Does it have green space nearby?
- What are the local amenities like?
Although there are no guarantees, if the property is in a location that would still be in demand in years to come, then it may not suffer as much if house prices did dip.
If you’re ready now, there’s little point in waiting for house prices to drop as this may not happen over the next year or so. If you can afford to buy a home, and you plan to live in it for several years, you should still go ahead.
When will house prices drop?
While the rapid growth over the last couple of years is clearly not sustainable, we can’t predict the future. Some experts are estimating that the cost of living crisis could cause house prices to fall as much as a tenth in 2023. Of course, with the increase we’ve already seen, this still wouldn’t necessarily make housing ‘cheap’.
When is the best time of year to buy a house?
The best time of year to buy a house can differ based on your priorities. Generally speaking, spring is the best time of year for choice, as more properties tend to be on the market.
August is usually a quiet month for house hunting, as families prioritise summer holidays over buying/selling their homes. Activity does tend to pick up again in September though.
November and December are typically slow months due to the festive period. Sellers would likely hold off putting their homes on the market until the new year. That being said, with less activity going on, a person buying during this time could benefit from a quicker process if the property has no chain. Just don’t forget about the Christmas shut down period for businesses.
Has the cost of running a house increased?
Yes, the cost of running a house is going up. However, this isn’t unique to owned or mortgaged homes. Even rental properties are costing more to run due to inflation and increased energy costs.
If you’re looking for some easy ways to help cut costs by conserving energy, take a look at our guide to reducing your home’s carbon footprint.
Is it worth buying a house that needs work?
It’s not just our bills that are on the rise. The cost of certain goods and services are also increasing, which will have a direct impact on other household costs – for example, building materials.
This means that if your new home needs a new roof or windows, then they’ll cost more to replace than they would have three years ago. With this in mind, the amount of work needed is an important factor when searching for a home you plan to buy.
If you’ve fallen in love with a fixer-upper, then a Level 3 Rics Home Survey would be highly beneficial. This is the most extensive type of home survey you can get, so it’ll tell you everything that needs to be done to the property.
From there you can speak to some local tradespeople to get an idea of how much the renovations may cost you. Armed with all this information, you may even be able to re-negotiate your offer!
Will rising living costs affect my mortgage application?
In short, yes, rising living costs could affect your mortgage application. As part of the process, your affordability will be assessed to ensure that you can afford both your mortgage payments and the cost of running your new home. This needn’t put you off though, as lenders are already releasing new green mortgage deals that reward lenders whose homes are more energy-efficient.
Homes that are energy efficient generally cost less to run and, as such, you could benefit from lower rates. Criteria may differ per lender, but to qualify for a green mortgage the property would need an energy efficiency rating of A or B.
Are you ready to buy a house?
Think you’re ready to take the leap? Let us take the stress out of the mortgage so you can focus on the move! Get in touch today to book a free, no-obligation appointment with our team to go through your mortgage options.
You can also use our handy affordability calculator to work out how much you may be able to borrow.