Is Now a Good Time to Buy a House?

couple getting keys to first house

The current housing market upheaval may have made you question whether now is a good time to buy a house or other residential property.

The housing market is fast moving and with economic pressures looming there are a number of forecasts that are putting homebuyers off. The truth is, the economic outlook is far less gloomy than you might expect and buying a residential property now might be suitable for your circumstances.

This guide looks at the housing market, the economic outlook and explains why buying a house now could be great timing. Let’s get stuck in.

What is the Housing Market Expected to Do?

To begin, let’s look at the housing market.

For the last few decades, house prices have been rising with some years experiencing marked increases. This has been caused by a number of factors:

  • The UK population is growing and the natural demand for housing has increased.
  • Consistent immigration has put strain on the already struggling housing sector.
  • Successive governments have failed to meet housebuilding targets of increasing supply to meet demand.

Before the Russian invasion in Ukraine, many analysts were predicting further price rises in the housing market, albeit at a reduced rate compared to the pandemic years.

After the invasion of Ukraine, the world economy has struggled to cope and alongside strains caused by the pandemic, the UK economy has found itself in a position of stagnancy with negative growth and high inflation.

Predictions for the Housing Market

Recently, Liz Truss and her government announced a raft of changes which are expected to impact the housing market significantly.

Here are the key takeaways from these changes:

  • Stamp Duty changes are making house purchases more consumer friendly with higher thresholds and lower Stamp Duty payments overall.
  • The Bank of England has indicated ‘significant interest rate increases.’
  • The overall anxiety around mortgages is going to reduce demand for properties and house prices are expected to remain the same or fall in the next year.

What is the Best Time of Year to Buy a House?

Historically the best time to buy a house in the UK is during the Spring. This is because winter months are often dedicated to family occasions, Christmas and New Year with few people wanting the hassle of dealing with a house move.

Summer months likewise tend to be spent on holiday and visiting family – which again deters properties being listed. Autumn listings are more common; however, sellers are wary that a house sale could be prolonged into the festive period.

During the Spring, the housing market heats up with more choice for buyers as sellers look to take advantage of this opportune time of year.

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What is the UK House Price Index?

The UK House Price Index (HPI) tracks the housing market over time and provides detailed analysis of house prices in areas across the UK.

The data is collected from house price sales recorded with HM Land Registry, Registers of Scotland as well as Property Services Northern Ireland. The Office of National Statistics (ONS) then collates this information and publishes it.

For sellers – The HPI can help ascertain the expected sale price in your local area.

For buyers – HPI helps you budget for the expected house price in your desired area.

Property marketing sites like Zoopla and Right Move also display data from these organisations in more detail, often having comparable property prices to the one you’re interested in.

Using the HPI as a buyer is useful, especially if you think a property has been listed at too high a price and you wish to negotiate the value. Having data to hand to approach the agent with can strengthen your bargaining position.

What You Should Consider When Buying a House

Now we have a general understanding about the property market in the UK, let’s apply that information and answer the question – is now a good time to buy a house?

The answer will ultimately depend on your circumstances. But there are several reasons why now, or at least in the near future, could be considered a good time to buy a house.

Tax Cuts Are Going to Help You

The highlight tax cut for homebuyers is the stamp duty reduction as well as the threshold increase for first time buyers. This threshold increase is significant, and many first-time buyers will now find themselves without any stamp duty liability.

If you’re a first-time buyer, purchasing a property valued at £400,000, this will now be free from stamp duty – a saving of £5000 against the previous rules.

Additionally, the cuts in income tax will also help you save for a house deposit. For lower rate taxpayers, the government has extended the tax-free threshold and reduced the rate of income tax by 1%. This sounds minimal, and certainly the wider media have reacted adversely to the tax cuts – but for the average lower rate taxpayer, it will help more than you envisage.

For example, if you earn £25,000 a year, with the increased personal allowance threshold and tax cut you will take home £21,179 after tax and national insurance has been deducted. This is in comparison to the £20,692 you would have taken home under the previous chancellor with the planned National Insurance hike.

That is a difference of £487 a year. Of the total £25,000 this is an effective tax cut of 1.948%.

House Prices Expected to Stay the Same or Fall

Depending on where you source your information, house prices in the UK are expected to either remain level or fall with few analysts expecting an increase.

This means alongside the savings on stamp duty and the increase in your take home pay, you will have at least a property market that is level with current values.

If property prices fall while you are looking to buy a house, you are likely to make a significant saving on the purchase (compared to recent prices) and be in a powerful bargaining position. This is because during periods of house deflation, vendors looking to sell typically panic and try to sell as quickly as possible.

But What About Mortgage Rates, Aren’t They Increasing?

Yes, mortgage rates are increasing but there are three areas to consider with mortgage rates.

  • Mortgage products will change – your mortgage is a long-term financial commitment, and a mortgage deal will last typically between 2 and 5 years by which point the mortgage market should be different.
  • The Bank of England took decisive action to buy Government Gilts which has a big impact on future interest rates. This action could signal that the Bank of England is prepared to take a more cautious approach to raising interest rates with one leading analyst predicting the Bank of England base rate won’t exceed 3%.
  • Even if we assume a worst-case scenario, and a high mortgage interest rate, the amount you would pay over a 2-year fixed deal is likely to be lower compared to the savings we have discussed.

What Our Clients Have To Say

Should I Look at Mortgages Now?

All information provided is on a general basis and your specific financial situation will be the determining factor about whether it is a good idea to buy a house now. With Spring around the corner, if you are looking to buy a house, now is the time to discuss your circumstances with a mortgage broker.

Boon Brokers is a UK-based whole of market Mortgage, Insurance and Equity Release broker. Boon Brokers does not charge client fees at any stage of the advice and arrangement process.

Contact Boon Brokers today to find out if now is a good time to buy a house for your circumstances.

Gerard BoonB.A. (Hons), CeMAP, CeRER

Gerard is a co-founder and partner of Boon Brokers. Having studied many areas of financial services at the University of Leeds, and following completion of his CeMAP and CeRER qualifications, Gerard has acquired a vast knowledge of the mortgage, insurance and equity release industry.