Are you in the market to buy a house in the UK? With the current economic situation, it can be difficult to decide if now is a good time to make such a large purchase. In this blog, we will take an in-depth look at the UK housing market and discuss the factors that could affect your decision.
We will explore the impact of high inflation and rising interest rates on house prices, the current state of the housing market, and the potential risks and benefits of buying a home at this time. We will also provide helpful tips to help you make an informed decision on whether buying a house in the UK is the right move for you, right now…
Overview of the Current UK Housing Market in 2023
The UK housing market is currently facing a period of uncertainty as the economy navigates a landscape of mixed signals. On the one hand, news such as a budget surplus, record FTSE100 figures, and an unexpected increase in the Purchasing Manager’s Index have all indicated a strong economy, yet on the other hand, some economists are predicting a recession as interest rates rise.
This has been reflected in the housing market, with transactions and mortgage approvals falling due to higher borrowing costs, yet activity has remained stronger than expected since the festive period. In response to this uncertain environment, five-year housing market forecasts have been updated to reflect these changing conditions.
Knight Frank’s latest report suggests that the UK housing market is likely to experience a 10% drop in house prices over the next two years, due to the impact of higher mortgage rates on affordability. Although this will be a short-term drop, the forecast for 2025 is a 4% rise compared to the 2% increase predicted in October.
In February 2023, the number of prospective buyers registering in the UK was more than the five-year average, with a 10% increase. Furthermore, there was a 42% rise in accepted offers, suggesting that market activity will remain strong. Predictions point to the prime London markets outperforming the UK in the upcoming years, due to a higher concentration of cash buyers, the return of global travel, the currency advantage and the 15% decrease since its peak in 2015.
Impact of High Inflation and Rising Interest Rates on House Prices
The interest rate is the fee that is charged for borrowing money, as well as the rate of return for saving money. It is the percentage of an amount of money that is paid over a period of time and is usually expressed as an annual percentage rate (APR). This rate is usually set by the lender and is either fixed, meaning it stays the same, or variable, meaning it can go up or down over time. The rate of interest can have a major impact on the cost of borrowing money, as well as the return on savings.
For instance, if you deposit £1,000 into a savings account with a 2% interest rate, you would have £1,020 a year later.
When interest rates are low, the cost of borrowing money is diminished, making it easier for people to purchase a house, thus pushing prices upward. Conversely, when interest rates are high, borrowing money becomes more expensive and people may opt to save their money instead, which can lead to decreased house prices.
Since the onset of the global financial crisis in 2008-2009, the UK has had historically low-interest rates. The Bank of England rate dropped as low as 0.75%. Homeowners with a variable mortgage who took advantage of these rates have had a beneficial repayment experience. For property investors such as landlords, the low-interest rates have been advantageous in terms of cash flow. However, it is not feasible to maintain such a low rate, so the Bank of England has recently voted to raise interest rates from 0.25% to 1.5%. As of the time of writing, the Bank of England has further increased the rate to 2.75%.
The Pros and Cons of Buying a House in the UK Right Now
Buying a house can be a daunting decision, as it involves a substantial financial commitment and responsibility. However, there are numerous benefits to owning a home that can make it a worthwhile investment. On the plus side, homeownership provides a sense of stability and security, as well as the potential for increased home equity and the ability to customize your home to suit your needs.
Pros:
- Lower mortgage rates
- Increased housing supply
- Increasing equity
- Tax incentives
- Improved home amenities
- Lower closing costs
- More attractive financing options
- Growing rental market
- Improved technology
Cons:
- Upfront costs
- Responsibilities
- Risk
- Long-term commitment
- Lack of flexibility
- Taxes
- Insurance
- Unforeseen expenses
- Maintenance
Owning a home can be an effective way to generate passive income through rental income and appreciation. Starting your new life with your partner can be a great investment and a great way to build wealth over time. By buying a home, you’re not only investing in the property itself, but also in the surrounding estates and local market. This can result in rental income and appreciation in value over time, as well as benefits such as tax deductions and increased equity. Owning a home can provide stability and security as you and your partner start your new life together.
On the other hand, there are also some drawbacks to owning a home, such as the added costs of taxes, insurance, and maintenance. Additionally, if the housing market takes a downturn, it can be difficult to quickly sell a house, meaning homeowners could be stuck in a bad investment. Ultimately, buying a home is a complex decision that requires careful consideration of both the potential risks and rewards.
Final Thoughts
The UK housing market is currently in a period of uncertainty, with a combination of favourable and unfavourable disclosures. The recent increase in interest rates has had an adverse effect on the market, with transactions and mortgage approvals falling. Despite this, market activity has been strong since the festive period and the latest forecasts predict a 4% rise in house prices by 2025.
When making the decision to buy a house, it is important to consider both the pros and cons. The advantages of homeownership include the potential for increased home equity, tax incentives, and improved amenities, while the drawbacks include upfront costs, responsibilities, and risk. Ultimately, the decision to buy a house should be based on your individual circumstances and preferences.
Thomas Pardy Removals – Helping You Move Home
At Thomas Pardy, our service for removals in Bournemouth, to surrounding areas and overseas movers, is designed to make your move as stress-free as possible. We understand how daunting it can be to move home, and that’s why we are committed to providing a tailored service that meets your needs.
We believe that planning is key to a successful move. That’s why we provide a comprehensive range of services, including packing, transport, and storage. We can also provide a range of additional services, including the dismantling and assembly of furniture, the provision of packing materials, and the cleaning of your old property.
Call our team on 01202 985 109 to start your move.