When is the right time to buy a house?
With house prices falling this past month, many may be considering whether now is the right time to buy a house. In this article, we will provide some considerations to help you decide.
Housing Prices & Interest Rates
The latest data from the Halifax House Price Index recorded the biggest monthly fall in house prices for October, with the average property value lower by 0.4% – the biggest monthly fall since early 2021.
In terms of next year, Lloyds Banking Group has forecasted that house prices are to fall 8.8% in 2023 and 2.3% in 2024 before seeing a growth of 0.6% in 2025. Factors such as inflation peaking at 10.7% by the end of the year and unemployment reaching 5.4% by the end of 2023, as well as rising borrowing costs have led to the assumption that this would drive prices down.
Mortgage Rates
With inflation yet increasing, including a rise in interest rates to 2.25%, a 10% increase which is the highest figure since 1982, another factor to consider is that the average mortgage payment is expected to rise by about £50 a month as a result of these higher interest rates. For first-time buyers earning the average wage, a 20% deposit would see their monthly mortgage payment rise from around 34% of take-home pay to around 45% based on the average mortgage rate of 5.5%.
Cost of Living
Meanwhile, the cost of living is steadily increasing, with the average household food bill expected to reach £300 a month. In addition, energy bills increased by 54% in April, and were due to increase by a further 80% this past October, however the new Energy Price Guarantee has limited this to 27%, with a further increase of 20% in April 2023.
In the past, first-time buyers have struggled to get on the housing ladder due to low-interest rates, which meant there was a flooding of people borrowing from banks and inflating the housing market. However, with the increase in interest rates, there is a prediction that there may be a decrease in competition for properties, meaning properties are more likely to remain around the asking price. In addition to this, there will be a shift in more people selling before buying to determine what level they are at in terms of affordability to particular housing and with the current cost of living.
Despite the increases, the property market in Scotland remains robust and still operating to a busy rate, despite a slight decline due to recent market conditions. With house prices increasing by double digits since the pandemic – something that is not usually normal in the housing market, it is likely to stabilise and fall with the increase in mortgage rates, cost of living, and energy prices.
Overall, there is no perfect time to purchase a house, it will entirely depend on the individual and their circumstances. Although house prices may likely to drop in the next year or two, interest rates and bills are likely to still increase, therefore, house buyers should be mindful and triple-check that such bills are affordable, if so, then it is most definitely a good time to buy.
If you have deposit sitting, and have found your dream home as well as a mortgage that is affordable, you are more likely to stay in that property for a long time.
We can help you!
If you have any further questions, Wallace Quinn is here to help at every step of the purchase. As members of the ESPC in the East, we are able to provide expert knowledge in the buying and selling process. In addition, we are constantly up to date with anything going on in the Scottish property market and possess the skills and expertise to guide and support you, even through the most difficult of times.
If you are thinking of selling a property, do not hesitate to contact us and we will help you to take that first step.