Should home buyers hold out for better market conditions?

In the wake of last autumn’s disastrous Mini Budget, the housing market has been gradually readjusting. So what does this mean for home-buyers if they wonder whether they should purchase now or hold off until conditions improve?

Well, let’s look closer at where we are right now.

The first factor to note is that while house prices have continued to go up over the last six months, the rate of house price inflation is slowing down.

As data from the Office for National Statistics (ONS) shows, average UK house prices went up by 9.3 per cent in the year to December 2022. The rate of increase was just 6.3 per cent in the year to January 2023.

For home-buyers, the average house price stood at £290,000 at the start of the year – £17,000 higher than at the beginning of 2022. So, despite the slowdown in house price inflation, affordability pressures still exist for many people.

What are the changes?

Even before the Mini Budget sent the market into a tailspin, interest rates gradually rose. The Bank of England raised interest rates for the 11th consecutive time in March, placing them at 4.25 per cent – and this is having a significant impact on those home-buyers seeking to get on the property ladder for the first time.

There is talk the Bank will increase rates again in May to 4.5% before inflation starts to fall sharply.

Fast-changing market conditions

Interest rates have been going up to curb soaring inflation. Although there were cautious hopes at the turn of the year that the situation would improve. We did see a surprise jump in inflation in February, compounding the pressure on people’s finances.

At the same time, hard-pressed consumers must weigh up the impact of recent government policies. For example, the income tax personal allowance and higher rate thresholds are frozen until April 2028. This will pull more people into the income tax system for the first time or into higher tax bands over the next few years.

We’ve also seen in the recent Budget that while the government is extending 30 hours of free childcare. To children over nine months old, this will only happen gradually over the next few years.

The announcement offered no immediate relief to parents struggling with high childcare costs. Additionally, the Budget didn’t include any mention of steps being taken to boost the property market.

We should also point out the added complication of the recent collapse of Silicon Valley Bank and the takeover of Credit Suisse by UBS, which has made the swap rates used by banks and building societies tumble.

On the one hand, these events have led to concern among some about a new banking crisis being just around the corner. On the other, this has led to better mortgage rates that buyers could take advantage of right now.

Use Nationwide’s House price calculator here

Read about the benefits of using a Mortgage Broker

What is all this doing to home-buyers?

Amid all this uncertainty and considerable changes in the economic environment, many people will need clarification about what to do next and when.

Research by OnTheMarket in February showed no significant consumer behaviour and sentiment shifts. For example, 69 per cent of buyers were confident they’d buy within three months. The same percentage as in January, and 62 per cent of sellers were satisfied that they would sell their property within the next three months, up from 60 per cent in January.

But this survey was carried out before the March Budget and the recent difficulties we’ve seen in the banking industry.

Of course, you can only advise people based on current market conditions, as you can’t confidently predict the future. That means consumers must think about what is right for them at this specific moment.

But the one certainty is that borrowers need specialist advice more than ever, with a professional, regulated expert in this field helping them navigate this ever-changing environment.