Is Now A Good Time To Move From Renting To Home Ownership?

June 14, 2023

The housing market has been showing signs of turbulence recently, with further rises to interest rates and the first annual fall in house prices for 11 years. The ongoing cost of living crisis means that there is less demand for properties, which could drive down prices further. Mortgages are less affordable for many people.

All this paints a very mixed picture for first time buyers who are currently renting. There are pros and cons to both making the move to homeownership straight away, and also to waiting out the uncertainty to see what happens. Here’s a look at the arguments for and against on each side.

The first point to consider is house prices. After two years of sharp growth, house prices are now beginning to fall. According to the Halifax, annual house prices fell by 1% in May, which is the biggest year on year fall in 11 years. Nationwide Building Society have recorded an even bigger annual fall of 3.4%.

However, property market experts are not predicting a major crash such as the one triggered by the 2008/9 financial crisis. Despite the overall annual fall, house prices are still growing month by month, if at a slower rate than in recent years.

Tim Bannister of Rightmove said: “Steadying mortgage rates and a generally more positive outlook for the economy are contributing to more seller confidence, though there are likely to be more twists and turns to come.”

He added: “The market is still very price-sensitive and it is important that new sellers do not damage their prospects of a sale by overpricing initially and reducing later, with agents reporting that it’s the realistically-priced new instructions that are selling best.”

The other point to consider is that house prices have been artificially inflated in recent years by pent up demand created by the pandemic lockdown, the stamp duty holiday, historically low mortgage rates, and the desire for more space. What is happening now is more of a return to business as usual than a significant slump.

Tim Bannister commented: “What’s much more likely is that the market will continue to transition to a more normal activity level this year following the exceptional home-moving activity of the pandemic years.”

Now, interest rates have increased, making more deals more expensive. There is also the likelihood that the Bank of England will increase the base further in an effort to curb stubbornly high inflation rates. The cost of living in general is also remaining high, although energy bills have fallen slightly.

So, while houses may be slightly more affordable, mortgages are not. For first time buyers who have the option of living with family while they save up for a deposit, it may make more sense to wait and see what unfolds during the next 12 months.

However, for tenants, waiting may not make any sense as average monthly rents are higher than average mortgage monthly mortgage repayments in many areas of the country.

If you are looking for IVA mortgage specialists, please get in touch with us today.

Your home may be repossessed if you do not keep up with your mortgage repayments.

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