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Should I buy now or wait?
The age-old question of whether to buy a home now or wait for a better opportunity has been a topic of much debate and speculation for years.
However, recent events have only added to the uncertainty and hesitation around this decision. Rising costs of living and energy make it difficult for many people to save up for a deposit or afford a mortgage, and the current uncertainty around mortgage interest rates and house prices only adds to the unease.
The ongoing conflict in Ukraine and the collapse of Silicon Valley Bank are just a few examples of the events that have contributed to this uncertainty and have left many people feeling unsure about making a big financial commitment.
Given these circumstances, it’s no wonder that people are questioning whether now is the right time to buy a home.
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Ultimately, without the benefit of hindsight, there is no clear right or wrong answer. The decision to buy a home is a personal one, and depends on a variety of factors such as financial stability, market conditions, and personal goals.
For many, the desire to time the market and find the perfect opportunity can be tempting. However, it’s important to remember that past success in timing the market does not guarantee future success. Many people who have successfully timed the market in the past were simply lucky, as there is no crystal ball that can accurately predict market conditions.
So, what are the key factors to consider when deciding whether to buy now or wait?
Rent or buy?
When it comes to deciding whether to buy a home now or wait, your current residential situation can play a significant role in the decision-making process.
For instance, if you find yourself paying a high amount of rent that is equal to or even higher than what you would be paying towards a mortgage, it may be worth considering the benefits of buying a home.
Paying rent every month can feel like throwing money away, especially when you consider that you won’t have anything to show for it in the long run. On the other hand, buying a home can provide you with a valuable asset that can appreciate in value over time, allowing you to build equity and potentially generate a profit when you decide to sell.
According to recent statistics, the average monthly rent in the UK is £1,142. However, this figure can vary greatly depending on where you live, with some parts of the UK seeing significantly higher rental prices. In major cities such as London, for example, the average rent is over £1,500 per month, and in some areas, it can be even higher.
Unfortunately, rental prices are only likely to continue to rise in the coming years, due to a combination of factors such as increased demand, limited supply, and rising living costs.
If like me, you happen to live in Brighton, where the average monthly rent is a staggering £2,500, delaying your decision to buy a home for another year could result in paying an additional £30,000 in rent to your landlord. This is a considerable amount of money that could instead be going towards paying down your own mortgage and building equity in a property that you own.
Interest rates
For many potential home buyers, one of the biggest concerns is the uncertainty around interest rate rises. With the Bank of England raising interest rates for the 10th consecutive month, it’s understandable that people may be hesitant to jump into the property market. However, there is some good news to be found amidst the uncertainty.
Despite the base rate going up, fixed rates have actually been coming down and are currently expected to continue to do so. While predictions can be unreliable, it’s worth noting that interest rates will still be significantly higher than they were eight months ago.
However, we were blessed with years of unprecedentedly low interest rates, so it’s not entirely surprising that rises were always expected – perhaps just not as aggressively as they have occurred.
Waiting to see if interest rates will come down in the short term is an option, but it’s important to keep the bigger picture in mind. If you’re currently paying £1,500 a month in rent and decide to wait six months to see if rates come down, you could end up paying a further £9,000 in rent while you wait.
There’s also the possibility that interest rates may go up instead of down.
It’s all about context and perspective. Last year, I had clients who were unhappy with interest rates of 1.5%, but now I have clients who are thrilled to get a rate of 4%. As long as you’re borrowing within your means and are comfortable with the repayments, there’s no harm in taking advantage of the current market conditions.
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Will property prices fall?
House prices have already decreased somewhat this year, and there is uncertainty around predictions for the remainder of the year. While there are plenty of reasons to believe that property prices will continue to fall, we’ve been saying that for a while, including throughout the COVID-19 pandemic, and the market has behaved differently than expected.
The property market is resilient, and there is an ever-growing shortage of housing in the UK, along with a strong desire to own property here, like in few other countries in the world.
If prices do continue to fall, they will no doubt rise again at some point, so it can be useful to take a long-term view when weighing up your options.
If you buy a home and live in it for a number of years the price will naturally fluctuate. If the market has gone down when you’re ready to move, the likelihood is that the property you buy will also be less expensive, so it can be relative.
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Reasons for moving
For some, moving is a necessity due to life events such as death, divorce, or financial difficulties. For others, the decision to move may be based on personal factors such as the need for more space for a growing family. When it comes to buying a home, it’s important to consider both your personal situation and the financial aspects.
Ultimately, owning a home should be seen as a place to live and call your own before considering it as an investment. While owning a home can be a significant financial commitment, the sense of pride and accomplishment that comes with paying off your mortgage can be a rewarding experience.
For more info on when to buy a property, please contact a member of the Strive team, by emailing [email protected] or call us on 01273 002697.
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Jamie Elvin
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