House price inflation may be over, and house prices may have finally started to show their first monthly decline since July 2021. According to the figures from Nationwide’s latest house price index, house prices fell 0.9% month-on-month, in September.
This means the average house price is now £268,282 – down from £272,259 in September.
The market has been hit by the turmoil following the mini-Budget, the mortgage panic and sharp rise in interest rates which followed and worries about the future as recession threatens.
Higher rates are not the only reason buyers might be questioning if now is a good time to buy. Property affordability and the cost of living crisis are both reducing purchasing power while energy prices are twice as high as they were a year ago, and eating into disposable incomes.
Higher borrowing costs and household incomes stretched by inflation mean there is less money around to spend on buying a home.
The UK’s biggest mortgage lender, Lloyds Banking Group, has gone so far as to predict a housing market slump, with prices dropping 8% in 2023, and then stagnating for the following four years.
At Continuum we are asking if things really are as bad as they seem – and whether you should still be thinking about a move.
Why you should not buy a house now
As borrowing costs have spiked, property deals are starting to fall through and there are clear signs this stress is having an impact on house prices.
But it is not just new sales that may be affected. As fixed term mortgages run to the end of their terms from the beginning of next year there may be many people who find they can no longer afford their home, leaving them with no option but to sell up.
A glut of distress sales would certainly drive prices down further. Holding off a purchase therefore could see prices fall substantially, and it might be possible to pick up a bargain.
But there is the other side of the coin. The increase in mortgage rates might make it more difficult to secure the funding you need to buy a home you want in the current climate, while an uncertain financial future might make it unwise to overstretch yourself and risk of being saddled with a home you can no longer afford.
Why you should buy a house now
The mortgage crisis that followed the Truss/Kwarteng minibudget has died down and many lenders who withdrew from the market are back. Mortgage rates are higher than they were of course – but there is some indication that they may have reached something of a plateau.
The new chancellor, Jeremy Hunt, was quick to reverse most of the announcements made by Kwasi Kwarteng, but kept the cuts to stamp duty – which may be a big plus particularly if you are a first-time buyer and the property would have been over the threshold.
But perhaps the most important reason to buy now is the simple fact that if you find the home that you really want, you cannot expect it to be around in six months’ time. Homes are still selling, even if they are taking a little longer than in the heady days of 2021, when buyers were so desperate they were buying sight unseen.
Committing to a mortgage you can afford now might not be unwise. We’re unlikely to see mortgage rates drop significantly in the immediate future, and a severe shortage of new properties will keep house prices elevated and very possibly put the brakes on any potential housing crash.
Even if house prices were to fall, if you’re planning to stay in the property, you have time for them to recover. It’s only if you need to move again quickly that you might face difficulties with reduced or even negative equity
Get an expert’s view
If you have found your dream home, have a decent deposit and can find a mortgage that is affordable for you, it might be time to buy – especially if you are planning to stay in the property for a long time.
Getting help with arranging the most suitable mortgage deal will be even more important than usual, and fortunately, at Continuum we can provide the expert help you need.
Simply call us.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable mortgage products, you should seek independent financial advice before embarking on any course of action.
Your home may be repossessed if you do not keep up repayments on your mortgage.
