Is now a good time to buy a house?

11 October 2023

Buying a house is now more expensive than ever. High-interest rates and inflated property prices combined with the current economic crisis have buyers questioning whether it is the right time to invest in property. Despite all of this, there are plenty of reasons why you should consider buying a house in the current property market.

The core reason that potential buyers should look at investing is that there are strong indications that property prices are decreasing, creating opportunities for cash buyers and residential property investors to take advantage of the declining market.

In such a volatile property market, securing your property purchase is challenging. Buyers and sellers are pulling out of exchanges for financial and non-financial reasons. Whilst the market is highly opportunistic, it is incredibly important to secure your purchase. The most effective way to do this is by equipping yourself with a high-quality conveyancing solicitor.

At Redkite Solicitors, we understand that individuals face significant financial hardships due to the current economic circumstances. However, due to the many reasons discussed throughout this article, we still believe it is a great time to invest your money in a new home. For professional conveyancing services throughout England and Wales, contact Redkite Solicitors to speak to a legal specialist.

Factors currently influencing property purchase decisions

The UK economy is currently in a tumultuous position. Global conflicts, the lasting effects of the pandemic, and national financial decisions are creating ripples throughout the economy that affect every single home in the UK. As a result, the housing market has seen a dip in sales over the past year.

Despite the current economic downturn, there are shifts in several areas of the property market that are enticing buyers to return towards the market. You can read more about these changes below.

  • Stamp duty

During the government mini-budget in September, it was announced that Stamp Duty Land Tax, which is paid on property purchases in England and Northern Ireland, would be reduced. These cuts determine that no tax is required on the first £250,000 of a property purchase.

For first-time buyers, the new rates entitle them to a tax-free property purchase of £425,000. Alternatively, property owners purchasing a second property continue to be subject to the 3% surcharge that is applied on top of the current stamp duty rates.

A similar increase in Land Transaction Tax thresholds has also made the property purchase more affordable for buyers in Wales. From the 10th of October, LTT tax-free thresholds were increased from £180,000 to £225,000.

SDLT and LTT are outright costs that can dissuade buyers from investing in a new home. The new reduced rates are, therefore, much more attractive to buyers.

  • House Prices

Across the last decade, house prices in the UK have risen by 53%. The majority of this increase has occurred in the past few years and has been attributed to the covid-19 pandemic, stamp duty holiday and current economic conditions.

The average UK property values reached a peak in July 2021 at an average price of £265,000. As of September 2022, HM Land Registry estimates that the average property price is now £294,559, indicating a 9.5% annual increase.

Despite the drastic increases in property prices, data from the last three months has indicated a clear downward trend, indicating the first decrease in house prices since July 2021. The Office for Budget Responsibility predicts prices to fall by 9% between the end of 2022 and 2024, providing confidence for buyers looking to invest in 2023.

This time of year is especially beneficial for those looking to snag a cheap property due to the limited demand for houses during the winter months. Sellers looking to sell their properties quickly are much more inclined to take a lower offer as there aren’t as many buyers in the market as there are during the summertime.

  • Mortgage rates

Since October 2022, mortgage rates have remained consistently high at around 6%. This made the cost of borrowing far less affordable for typical property buyers. Fortunately, mortgage rates have started to show a decline for the first time in seven weeks.

Buyers who had remained patient throughout this period can breathe a sigh of relief as the rates for fixed mortgages will likely become far more affordable again. After the removal of around 1,700 mortgage products from the market, new deals will likely become available, introducing two and five-year deals that buyers can commit to.

Zero Deposit Mortgages

A zero deposit mortgage, also known as a 100% mortgage, is a home loan where the lender provides the full purchase price of the property. The homebuyer doesn’t need to contribute any deposit towards the purchase, hence the term “zero deposit”.

This kind of mortgage allows individuals who might not have the savings typically required for a deposit to get onto the property ladder. The idea is that, instead of spending years saving for a deposit, they can buy a home right away and repay the cost over time.

However, due to economic uncertainty over the past 15 years since the 2008 global economic crisis, zero deposit mortgages have become extremely rare to obtain from lenders without a guarantor. Nevertheless, after a hiatus from the market zero deposit mortgages are back through Skipton Building Society.

Skipton Building Society’s 100% Mortgage

Skipton Building Society’s zero deposit mortgage is the UK’s first 100% loan-to-value (LTV) mortgage aimed exclusively at renters.

Charlotte Harrison, the group’s chief executive for home financing, said that rising rents and cost of living squeezes has made it “almost impossible” for renters to get on the property ladder as they struggle to save for a deposit.

In order to help, Skipton Building Society has introduced the new ‘Track Record’ mortgage that allows tenants over 21 to borrow between 95% and 100% of the purchase price of a property.

The deal is available for first-time buyers across Britain and as long as they meet the eligibility criteria they can purchase a home with monthly payments at a fixed rate for the first 5 years up to their current monthly rent.

This could be a great help to those who have a good history of paying rent but have only managed to save a small amount or none at all for a down payment on their first house.

Eligibility for the ‘Track Record’ Mortgage

To apply for Skipton’s Track Record mortgage you need to meet certain criteria detailed below:

  • Be a first time buyer that is 21 or older
  • Have less than a 5% deposit
  • Have proof you have paid the last 12 months of rent consecutively over the last 18 months
  • Have proof you have paid 12 months consecutively of household bills such as utility bills, council tax etc, over the last 18 months
  • Have no missed payment on debt or credit commitments in the last 6 months e.g., phone bills
  • Look to borrow no more than £600,000

It’s important to note this does not apply to second time buyers or those looking to purchase a new build flat.

Is now a good time to buy a house?

Throughout this article so far, we have discussed the three factors that heavily influence property purchase decisions. There are many moving parts when considering whether to purchase a house, including taxes, property prices, the conveyancing process and mortgage rates.

Several recent changes have subsided the cost of buying a house in attempts to make the purchase more affordable. With stamp duty reductions and more affordable housing prices, there are plenty of opportunities to be taken advantage of younger buyers with limited finances available may not yet be able to afford the higher mortgage rates. However, different types of property investors can take advantage of the current property market.

Purchasing a buy-to-let property could be a successful investment during this time. Whilst mortgage rates may be higher, those who can generate a consistent income will be able to offset the costs due to the significant demand for rental properties.

Additionally, cash buyers will significantly benefit from the recent drop in property prices.

Now is the time to keep a keen eye on the market and be ready to pounce on a great deal. Not only are sellers willing to accept lower offers due to the lack of activity in the market, but cash buyers are also far more desirable due to their ability to complete the purchase without complication.

What do Redkite Solicitors’ residential conveyancing services have to offer?

Here at Redkite Solicitors, we offer professional conveyancing services for residential property purchases across England and Wales. Despite current economic conditions, we believe there are plenty of opportunities for investment in residential property.

If you have paid off your mortgage on an existing property, inherited a large sum of money, or accumulated a large amount of savings, you may be in the fortunate position to invest your money in a property at a time when sellers are starting to accept lower offers than throughout the previous year.

After placing your offer, working with a proficient solicitor is incredibly important to secure your property purchase. Our legal experts are available to handle the proceedings of your purchase in the shortest amount of time. With Redkite Solicitors, we can make the conveyancing process as simple and hassle-free as possible. Get in touch today to get started.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.