Mortgage news

Investment in property has historically always felt like a safe bet. Culturally, within the UK, it is considered the ‘done thing’ to buy a house rather than rent, with many people both buying and moving, multiple times throughout their life.

But if Covid has changed anything, it’s changed everything. While other areas of the economy suffered, the housing market boomed.

Already powered by a decade of historically low interest rates, the stamp duty holiday encouraged buying, at a time many were navigating the realities of working from home, and re-evaluating what that home needed to offer. Many found themselves saving more money than ever thanks to the stay-at-home order and were able to take the plunge for the first time.

Now, with house prices higher than ever and a cost-of-living crisis, is it still a good time to buy a property?

Supply and demand

Supply of good quality housing stock was already below the level of demand, pre-Covid. Housing developments all but stopped during 2020 and 2021, with supply chain issues further delaying completion. Supply is now improving, but it is still outstripped by demand. While this simple equation of stock not meeting demand exists, house prices will continue to rise.

In January 2022, the number of prospective new buyers was 54% above the five-year average. The imbalance between supply and demand is particularly acute in the South West. House prices here increased more than any other area of the UK in 2021/2022. Lockdowns have highlighted the value of larger properties, greenery and space, and with more people working flexibly than ever before, demand for these types of rural locations and WFH suitable homes, continues.

Rising inflation

Despite soaring inflation and tax rises, we don’t expect this to have a huge impact on house prices throughout the remainder of 2022.

The Bank of England have increased the base rate six times since December 2021, yet mortgage rates remain low by historical standards. It is still relatively cheap to borrow money, there is still a supply and demand issue, and house prices will remain underpinned by these factors.

However, what cannot be ignored is that further rate rises are to be expected. With inflation at a 40 year high, it is inevitable. As the budgets of homeowners and potential homeowners face the cost-of-living pressure, and higher interest rates mean higher mortgage payments, we do expect these headwinds to lead towards the housing market softly beginning to correct during 2023.

So, is now a good time to buy?

For first-time buyers there is no perfect time to buy. Sure, there may be once in a generation events – such as the 2008 financial crash – which dramatically reduced prices, but this is also met with a period of instability which makes any financial decision more challenging. And, as no one can predict those sort of events, the time you choose to buy your house, should be when you’re ready and financially able to do so.

If you’re looking to upsize or home improve, you might want to consider your options. It is likely mortgage rates will increase throughout the remainder of 2022 and into 2023. If you know you are moving, or you know you are capital raising, securing a longer-term fixed rate sooner rather than later, may be a good option.

Buy-to-let landlords may find that things get more difficult for them over the next few years. The government has made it clear that it wants more people buying than renting, and with tax changes on the horizon, it may be a sector of the mortgage and housing market, that sees some changes.

It can be an uncertain time to buy property, but we are here to help you get the best deal for you. Our advice is free and, unlike your bank, we have access to the entirety of the market. For help on managing your mortgage, get in touch.