How DO you decide when it’s the right time to buy a property? There are so many factors affecting the property market, house prices and affordability that you can end up with decision paralysis, not knowing what to do for the best.
So, should you be buying now in the last quarter of 2023, or should you wait and see what happens?
Let’s take a look at some of the factors which affect the buying decision.
What you should consider before buying a house now
Whether you are currently living at home with family, in a rental property, or you are an existing homeowner looking to buy a house in a different location, perhaps to reduce your monthly payments, you’ll need to factor in the following to your decision.
Current house prices
In the past few months, UK house prices fell. Nationwide, one of the UK’s largest lenders reported a 5.3% drop in the house price index in August 2023 compared with the previous August. Market-leading property site, Zoopla suggests we could see an overall reduction of 5% in 2023.
It can be challenging to accurately predict when is the best time to buy because of the relatively long time between making the decision to buy and completing the sale. Much can change in the weeks or months that pass.
House price growth for investment purposes
People buy a property not only as a place to live but as an investment for the future. We all hope that house prices will increase over time and we’ll have equity in the property when we come to sell.
With property prices dropping at the moment, there’s a real risk that some borrowers could find themselves in a negative equity situation for the first time since 2008, especially if you only put down a small 5% deposit. If you are buying as a buy-to-let, then you usually are capped at 75% so this wouldn’t be such a risk.
Mortgage interest rates have been on an upward trajectory since December 2021, rising no less than 14 times in a row. However, at September’s Bank of England Monetary Policy Committee meeting the base rate was held at 5.25%.
In early October, some lenders began to offer lower average fixed rates which is a good sign. The next meeting of the BoE is scheduled for 2nd November so we could yet see more movement in mortgage rates before the end of 2023.
The decision about when to buy a house is one of the biggest financial decisions you’ll make. You need to be ready for the financial commitment that comes with having your own mortgage.
If you are a first-time buyer just getting on the property ladder, especially if you have only ever lived with your parents before, you must fully understand all the costs involved with buying a property.
If you have been renting, you’ll probably be more used to managing your finances so you’ll know how much you can afford on your monthly repayments based on paying rent.
2023 has been a challenging year with the cost of living crisis affecting the affordability of everyday items, not just mortgage costs. It’s important that you take time to thoroughly review all your expenses and your projected income to decide if now is the right time to buy a house.
Additional costs of purchasing property
Don’t forget that it’s not just the monthly mortgage payments you have to find when you make a house purchase. There are extra costs such as the conveyancing legal fees, mortgage arrangement fees, stamp duty (if applicable) and removal costs. Budget for all these to see if it’s really affordable for you.
Pros of buying a house now
Average interest rates have come down a little. There are some mortgage products available with interest rates starting with a 4 rather than a 5 for a two-year fixed deal. A cheaper mortgage deal means you may be able to afford the house of your dreams now compared to the same period last year when rising interest rates coupled with a higher property price made it impossible.
House prices have also reduced recently, making monthly costs a little more palatable. The latest figures show that average house prices have seen an annual fall of around 3% in the year to September 2023, taking around £10,000 off the average house price. When house prices fall, this tends to lead to a flurry of activity in the market which could then push prices back up. Buying power may therefore be better now than in a few months’ time.
Buyer demand dropped in the first six months of 2023 due to the rising costs of living and the relentless upward march of the base interest rate. Fewer mortgage approvals have led to less competition in the housing market from other buyers, meaning you could snap up the perfect property in your desired location as many sellers, especially landlords, seek to exit the market.
Cons of buying a house now
The soaring inflation rates of 2022 and 2023 so far have resulted in economic uncertainty for first-time buyers and existing borrowers alike. Although inflation is falling now, rising rates have put increased pressure on household budgets as mortgage repayments have increased, sometimes by hundreds of pounds a month for variable-rate mortgages.
First-time buyers will need as big a deposit as possible to take advantage of the best mortgage deals. This means saving at least 20% of the purchase price rather than going for the minimum deposit, which will mean higher rates. For those currently renting property, saving enough money for a house deposit is very challenging.
When is the best time to buy a new house?
A property purchase can mean a big mortgage loan, saving a large deposit and having bigger monthly commitments than ever before. However, you may still be able to find a deal that suits you when you are house hunting.
Many landlords have exited the rental market in recent years due to the rising mortgage rates and reduction in tax breaks, so there are more properties available where sellers are keen to move quickly. Offer below the asking price, and you may be surprised at the discount you can get.
Looking to get a mortgage in 2023? Contact Simmonds Mortgage Services today
Mortgage options change every day, so it can be hard to keep track of what’s happening in the current market. A mortgage broker such as Simmonds Mortgage Services, who has access to the whole of the mortgage market, can help you find the right product for your circumstances. Get in touch with us today.