Most experts agree that the property market is significantly above where it should be, partly linked with the lifting of Covid restrictions and the bounce in the market that followed the first lockdown. Prices are expected to return to December 2019 levels in a return to a more ‘normal’ market, following several years of increases. Currently, rising mortgage rates are putting downward pressure on house prices and there has been a small increase in the number of sales that fall through. In more expensive areas such as the South-East, there will be a bigger impact felt as affordability is already stretched and house values are expected to fall as a result.
Is now a good time to buy?
A survey carried out by the Building Societies Association showed that only one in seven people think that now is the right time to buy, with variation seen across the country. One in five (19%) people in London feel that now is a good time to purchase a house, compared with just 8% in Yorkshire and the Humber and 10% in the North-East.
What should first-time buyers do?
First-time buyers have been hardest hit by the current economic storm. With very few high loan-to-value mortgages available, many in this segment find themselves unable to buy. Mortgage rates have climbed at the fastest rate in a decade and are not expected to fall quickly. The situation is made worse by the cost-of-living crisis which makes it much harder to save a deposit.
Many of those who have recently managed to get onto the property ladder are now facing the expiry of their fixed rate mortgage. Some have decided to join forces with a friend or relative and enter into joint ownership in an effort to remain on the ladder. This involves a transfer of equity to the new joint owner and requires the support of a reputable legal firm, such as Sam Conveyancing, to complete some parts of the transaction.
Expiring fixed-rate mortgages
Some may be tempted to pay a penalty to get out of their mortgage early and fix a new rate. This may not be the best course of action, as rates are so high at the moment. It may be better to opt for a variable rate, at least for the time being, which is typically set at 1 per cent above the Bank of England base rate.
Is it a good idea to overpay?
This will depend on the individual’s situation. If the mortgage rate is higher than bank interest rates, it is better to overpay, but it is important to investigate any penalty fees. If there is a higher rate available on saving accounts, then the better choice would be to save. There is more information about this on the Money Saving Expert website.
What about selling at auction?
The benefit of selling at auction is that it is done in a day, meaning buyers and sellers can act quickly and don’t need to worry about long chains slowing down the process. On the fall of the hammer, the buyer pays a 10 per cent deposit which is non-refundable and contracts are exchanged. The downsides are that there is no guarantee of a sale and target pricing can be difficult to achieve.
