Is Now The Right Time To Buy a Home?

July 11, 2023

What’s this, an estate agent writing about whether or not now is a good time to buy a home in what seems like one of the most turbulent times in our economy? Yes, because, look through all the headlines and spend over 20 years in the industry and you’ll understand how it is that we, as an independent estate agent, see things differently.

For many, this uncertain economic climate has provided prospective homebuyers with the question of whether it is the right time to buy a home.

While it’s true that house prices have started to fall and are expected to fall further in the coming months, along with rising interest rates on mortgage deals, there are still compelling reasons to consider purchasing a home.

We’re not going to sugar coat anything, but equally we’re not going to be causing the panic that many are choosing too in the press. Instead, in this article we are going to shed light on the positive aspects of buying a home, focusing on the intangible factors that make homeownership a valuable and rewarding endeavor.

House Prices: A Temporary Dip:

The current dip in house prices should not deter potential buyers. It’s important to remember that fluctuations in the housing market are not uncommon and have been witnessed before, such as during the 2008/2009 financial crisis. The situation is different today and we are seeing the primary factor of lower house prices due to a rise in rates as a direct result of the central bank trying to fight inflation, causing wider economic disruption.

Historically, markets have shown resilience and the ability to rebound. By purchasing a home now, buyers can take advantage of lower prices and position themselves for future gains as the market recovers. For those selling, lower prices are not always welcome and we understand that, but if the general state of the housing market were to fall for a temporary period, then buying at a lower price is also reflected in this period.

If we were to consider traditional house pricing dips, terms of 18 to 36 months have been the standard pattern. Of course, how far the dip is, and how quickly rates come down is all in the hands of the Bank of England who will need to stimulate growth after economic disruption.

In short, we have seen house price dips before and everytime there is a dip, there is a rise. The UK housing market is not impervious to these factors.

Mortgage Rates: A Temporary Challenge:

The increase in mortgage rates, with 5-year deals surpassing 6%, may seem daunting at first – especially when you consider this time last year a 5-year deal at 1.9%.

However, it’s crucial to understand that higher rates have both pros and cons. While they may require larger monthly payments, higher interest rates also mean that more money is being invested into the principal amount, thereby building equity faster.

We have seen a lot of talk about how the government can influence lenders on extending the length of mortgages, from 25 years to 35 years. This can mitigate the increases in repayments as well as switching to things like interest only mortgages. There are mechanisms and wider options which new home buyers have a bit more insight into rather than those who are looking to remortgage right now.

Talk of “ticking time bombs” is not necessarily wrong but equally, it’s not necessarily right for home buying. You are locking in a deal at the start of your mortgage so you are not experiencing the shock of rate increases like those who secured their deals at a lower rate.

Speaking to good mortgage brokers is going to help buyers better forecast the affordability of a home and it is something we always advise to home buyers regardless of the wider economic situation.

It is important to view higher rates as a short-term challenge that can be mitigated by wise financial planning and by taking advantage of the numerous mortgage options available.

Long-Term Perspective:

When considering buying a home, it is crucial to adopt a long-term perspective. Houses are not just financial investments; they are also places where memories are created and cherished.

Isn’t this something that needs wider consideration when looking at home ownership? Owning a home provides stability and a sense of belonging to a community. It allows for personalisation and the freedom to create a space that reflects one’s unique style and preferences. The emotional fulfillment and pride associated with homeownership cannot be quantified solely in monetary terms.

A house is a home because of the things that you do when you’re there, it’s not just a bricks and mortar number on a spreadsheet. You build a life in a home. From children to pets, DIY projects to incredible kitchens and gardens, a home is something you make.

Yes, it’s a big capital outlay but if you’re into home ownership for a short space of time then there are other options, such as long term rental agreements which cover a 2 to 5 year investment.

Hedge Against Inflation:

One of the most compelling advantages of homeownership is the potential for property values to appreciate over time. While house prices can fluctuate, historically, real estate has shown a tendency to appreciate in value in the long run.

There is discussion right now about the pain of home ownership and how we need to start adjusting to a new way of thinking about using our homes to safeguard for financial gains in the future. This often happens and we saw this kind of discussion in the 2008/2009 financial crisis.

It used to be that a home was the best way to gain a future pot of money for retirement or to upsize into something bigger with eventual increases.

We believe that the discussion needs to move to what a home is. Hedging against inflation is a short term view as inflation rates like those seen in the last year in the UK haven’t been experienced since the early 90s. Yes, a home can guarantee protection against inflation in the very long term and with fewer homes being built and with demand still outstripping supply, this can be the case.

We recommend that you should look at a home as something that you live in and enjoy – so find one that suits your needs and one that is suitable for your financial situation too!

Expected Interest Rate Reduction:

As previously discussed, while the current mortgage rates may be higher, there is a widely anticipated belief that interest rates will start to decline in Q4 2024. This will be needed to stimulate the overall economy and drive investment back into the UK. Whilst this expected reduction can work in favor of current homeowners, enabling them to refinance their mortgages at more favorable terms in the future, new buyers have different options.

By getting into the housing market now, buyers can position themselves to benefit from the projected interest rate decrease and potentially save on their mortgage payments in the coming years. Again, speaking to a mortgage broker is going to be one of the most beneficial things that you can do and something like a short term interest only mortgage right now, can help you get the home you want.

Despite the current challenges and uncertainties in the housing market, there are several reasons to consider buying a home today. (And no, we’re not just saying that, we believe it!)

For home sellers, house prices may be lower and expected to fall further, mortgage rates may be higher, and interest rates could start to come down in the near future. However, it is essential to look beyond the numbers and focus on the intangible factors that make homeownership a worthwhile endeavor.

Owning a home provides stability, a sense of belonging, and the potential for long-term wealth creation. Ultimately, the decision to buy a home should be based on a combination of personal and financial factors, keeping in mind that the real value of a home extends far beyond its price tag. By embracing the opportunities available today, prospective buyers can secure a place they can call their own and embark on a fulfilling homeownership journey.

If you’re looking for the right home, want to discuss your mortgage terms or need further reassurance please get in touch with our team today. We can point you in the right direction when it comes to finding a home that meets your needs.

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