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The right time to buy a property?

Entering the property market can be a daunting endeavor, especially when faced with fluctuating house prices and rising mortgage rates.

House prices in the UK experienced a significant decrease of 2.6% in the year leading up to June, marking the largest annual drop since June 2011, as reported by Halifax. Concurrently, property sales took a substantial hit, plummeting by a third, reflecting the declining demand amidst the ongoing cost of living crisis. 

These factors, combined with the rise in mortgage rates, have left many wondering whether it is a favorable time to enter the property market. In this article, we will explore whether now is a favorable time to buy a property, considering the current state of the housing market, the impact of rising mortgage rates and the difficulties faced by prospective buyers. 

By examining these factors, we speak to Justine Gray of mortgage specialists Deedle Finance, to provide insight and guidance to individuals contemplating a property purchase in these uncertain times.

What Is Happening With Mortgage Deals?

The landscape of mortgage rates in the UK is currently experiencing significant fluctuations and challenges.

The combination of escalating mortgage rates and the cost of living crisis has dampened the overall demand for properties, leaving potential buyers grappling with uncertainty. Despite the soaring borrowing costs, there has been a slight increase in the number of mortgage approvals between April and May. 

However, economists project a continued decline in house prices as interest rates continue to rise. This projection reflects the delicate balance between supply and demand in the housing market.

Before the housing market experienced a decline towards the end of 2022, it had defied expectations by not only surviving but thriving. This was primarily driven by various pandemic-related factors, such as pent-up demand, the desire for more space and rural living, low mortgage rates and the stamp duty holiday that ended in October 2021.

What Is The Situation For First Time Buyers Or Low Deposit Borrowers?

Property portal Rightmove, disclosed that asking prices for first-time buyers reached a record high of £224,963 in April, representing a 2% increase compared to the previous year.

It is important to note that mortgage payments remain most affordable for those who have managed to accumulate a deposit of around 20% or 30%.

This poses a challenge for first-time buyers and those looking for low deposit mortgages, when unable to put down as much as £40,000 or £50,000. This can make it more difficult to secure affordable mortgage options, further adding to the obstacles they face in getting on the property ladder.

Another factor contributing to the complexities faced by first-time buyers is the increasing rental prices. As rental costs continue to rise, it becomes increasingly challenging for individuals to save for a deposit while meeting their monthly expenses. 

This, in turn, further intensifies the struggle for prospective buyers, particularly those trying to make their first step onto the property ladder.

What Do I Need To Consider?

While falling house prices may initially appear advantageous, the prevailing economic conditions and rising interest rates suggest that caution should be exercised. Prospective buyers need to carefully weigh the benefits against the potential risks.

Additionally, it is crucial for individuals to evaluate their own financial situation and consider factors such as job stability, long-term plans, and the ability to meet mortgage repayments in an environment of increasing interest rates. 

The current state of the property market raises uncertainties about the optimal timing for purchasing a property. The recent decline in house prices, coupled with the rising mortgage rates, presents both challenges and opportunities. 

First-time buyers, in particular, face hurdles due to their limited deposit savings and the mounting rental costs. 

Should I Wait To Buy A Property?

In one sense, the answer is yes, in that you could wait for house prices to come down and for bank lending to relax and open up more opportunities for buyers.

On the other hand no, because if the market keeps rising, it will only be harder to get on the ladder.

Seeking professional advice and staying informed about market trends can assist in making a well-informed decision.

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