Is now a good time to buy a house?

With mortgage rates on the way down and the UK housing market having proved its resilience in the face of significant headwinds, is now the time to take the plunge and buy a new house?

You can’t predict the weather, they say – and it would seem the same could be said for the UK housing market, certainly if recent forecasts by the leading economists are anything to go by.

Those brave enough to send their memories back to the early months of 2020, when the world was plunging into a pandemic, will recall bold predictions by economists such as the Centre for Economics and Business Research that the housing market would fall by double digit figures.

The opposite ended up being true. Between January 2020 and December 2022 house prices in the UK grew by 20.4%, according to Halifax's closely watched House Price Index. The sharp rise was attributed to a so-called “race for space” during the pandemic, as well as a stamp duty holiday and higher household savings as people were spending less on holidays and leisure.

By the end of this period, however, the UK was in the midst of an unprecedented cost of living crisis, with energy bills and food prices skyrocketing and mortgage rates multiplying as the Bank of England embarked on a run of 14 consecutive interest rate rises in an effort to tame inflation.

The doomsday predictions were back in full force – economists once again predicted double-digit decline in house prices, with homeowners bound to struggle with spiralling living costs and mortgage repayments. Halifax, the UK’s largest mortgage lender, positioned its own crystal ball around the centre of price forecasts, predicting the market would fall by 8% in 2023.

A year later, however, Halifax’s House Price Index once again showed the consensus among economists had been proved wrong. UK house prices in fact increased by 1.7% throughout 2023, Halifax found, attributing the unexpected growth to a shortage of properties for sale as homeowners chose to absorb rising costs and hang tight rather than sell in an uncertain market.

With the UK housing market having displayed remarkable resilience through significant disruptions and headwinds over the past four years, it begs the question: is now a good time to buy? The Bank of England has held interest rates at 5.25% at its past three MPC meetings and mortgage lenders are already reducing rates ahead of anticipated monetary loosening this year.

“Asking if it's a good time to buy is quite a sweeping question that doesn't take into account things like local nuances or, most importantly, your personal circumstances,” says Marie​ Dalrymple, equity release and mortgage specialist at Ascot Lloyd. “At this moment I have a few clients who are waiting because their current deal is not up until spring time so they are waiting to see if rates come down further. Slowly but surely rates have been falling in recent months.

“However, while the general direction of mortgage rates does appear to be downwards for now, there's no guarantee that things don't change again. We've seen the impact of conflicts in Ukraine and Gaza on inflation and there is always a risk that fresh volatility elsewhere in the world, such as Yemen, could cause the Bank of England to keep interest rates higher for longer than the markets are currently expecting. Trying to perfectly time the market won’t get you far.”

Indeed the old adage about the stock market is just as true for housing: there’s no use in timing the market, it’s time in the market that counts. As recent years have shown, even the nation’s top economists can’t predict the fortunes of the UK housing market, so why bother trying? This is even more true in an election year when housing policy, including changes to stamp duty rates, planning rules or housebuilding targets, could sway the housing market in any direction.

Buying a house – as a first step on the property ladder, to move home or even as an investment – should be a decision you make based on your individual circumstances and financial goals, and with the long term in mind. A mortgage adviser will be able to assess your situation, including how much you might be able to borrow, to help you make the right decision for you.

“There will be people who consider the current mortgage rates to be quite normal by historic standards, and of course first-time buyers today never experienced the decade or so of rock bottom rates after the financial crisis so that’s not a comparison for them,” Dalrymple adds.

“There's little sense in not buying a house simply because you can’t get mortgage rates starting with a one or two anymore. We are where we are and nobody really can predict the future, so it's simply about assessing your situation to see if what you can buy meets your long-term goals.

“If you are one of those people who has wanted to move house for some time but you have been sitting on your hands for a year or more due to rising interest rates, then the outlook is certainly better now than it has been for a while. Especially if there are murmurs of movements in government policy to energise the housing market in this election year, then it's at least worth starting a conversation with a mortgage adviser to see what kind of opportunities are out there.”

Taking on a mortgage is a major decision and remortgaging to the right deal can be confusing. At Ascot Lloyd, we source products from the whole of the market, often with access to special rates and products that aren’t available direct to you on the open market. Crucially, an expert mortgage adviser will analyse your circumstances and search the market to get the best deal for you. Get in touch to start a conversation today.