Is It a Good Time To Buy Property?

When is the best time for me to buy property? It’s a question most of us have asked at some point. Whether just to ourselves, to family or friends, trusted advisors or the internet. The wise-crackers will say ’20 years ago’, ruing the way house prices used to be so much lower. For those of us who don’t own a Tardis, the answer requires us to balance where we would like to live now, our plans for the future, and our financial realities.

What is happening in the property market?

Many of the conversations we have had recently include this question. With interest rates higher than they were a year ago, and house prices falling, there is plenty of advice out there saying now is the time to ‘wait and see’. It’s true that Nationwide and Halifax (who between them make up about 30% of UK mortgages) are reporting falling house prices, with November showing the biggest drop since October 2008 – the last financial crash. But, those of you looking for a bargain will be disappointed as average prices are still higher than they were 12 months ago, and almost 20% higher than before the Covid pandemic.

Falling property prices appear to be linked with rising interest rates (and other costs), which means a squeeze on all our finances, plus a general wariness with so much global instability. As a result many buyers and sellers are simply waiting to see what happens. All brought together, this means that, if you can afford it (a big ‘if’!), then now is a much more relaxed time to buy property, with fewer buyers to compete with.

What will happen next with mortgage interest rates?

So what about those interest rates? As they have such a big impact on our monthly finances, then the big question is what will happen to mortgage rates in the future? With most of us preferring a fixed rate deal, then should we lock in for a short time, or a long time? Will we be saving ourselves from more pain, or agreeing to pay over the odds? This matters, because it hits our pockets hard – the difference between 2% and 5% on a £200,000 loan over 30 years is £335 / month. The short and honest answer, is that it is impossible to know! Anything else is a guess.

In general, in financial terms, the less risk you take, the more it costs you. However, from what we see with rates at the moment, we are in an unusual position of 5 year and 10 year fixed rates being cheaper than 2 and 3 year deals. This means that the market expects that the medium term outlook is for lower interest rates than we have at present.

Try to think about your mortgage across 10 – 20 years

Taking a step back, there is another way that I’d invite you to consider the original question. Buying a property is often more about what stage of life you are at, and is generally a sign of being ready for some long-term thinking. Perhaps you’ve now found a place to live, or a job that you want to stay in for a long time, or you and a partner are ready to make a long-term commitment. Or maybe you are thinking about children, elderly relatives, or long-term investments. These are bigger and more important decisions than the short-term vagaries of the financial markets. For many of us, the best time to buy should be driven by our life’s circumstances, and our hopes for the future. A property, mortgage and associated protection should try and fit with these, looking to the next 10 or 20 years, rather than one or two.