Thinking about buying a home is exciting, and stressful, and daunting all at the same time.
Then you add in 2020 into the mix. The coronavirus pandemic, Brexit negotiations, and ongoing uncertainty has changed the face of the UK economy.
Unexpectedly, the property market has remained remarkably strong. Government stimulus initiatives like a temporary Stamp Duty holiday, alongside a large number of people re-evaluating their living situation, has led to a surprisingly active property market.
But, what does this mean if you’re looking to buy? Are you likely to get a good deal on a property (or a mortgage) at the moment?
In this article we look at some of the key things you should bear in mind if you’re looking to buy a property this year.
Unless you’re lucky enough to have a substantial amount of money saved up, knowing what’s going on in the mortgage market is vital if you’re thinking about buying a property.
The best mortgage markets for home buyers are created when there are a lot of mortgage products on the market. This creates the conditions for a large amount of competition between lenders to offer the best deals in order to attract buyers to use their services.
Currently the mortgage market situation is pretty mixed. Many of the mortgages currently available have low interest rates, but there aren’t actually very many products available. It’s also becoming more normal for banks to expect you to have a deposit of at least 15-20% if you want to apply for a mortgage.
This means that it’s still quite appealing for buyers to take out a mortgage if they can afford to. If you’re a second stepper, you might be able to use the equity you’ve built up in your first home towards a deposit. This will let you take advantage of the attractive interest rates currently on offer.
On the other hand, if you’re trying to take your first step onto the property ladder – or don’t have access to a larger deposit – you might find it harder to qualify for a mortgage with the best rates.
When you’re looking to buy a property, the other thing to think about is the state of the property market generally.
Are there lots of other buyers looking for homes? Is there a lot of choice of the kind of property you’re after? Are house prices increasing, decreasing, or remaining fairly static?
Currently, the UK property market is a ‘Sellers’ Market’. This means that those selling property are in a stronger position than those trying to buy.
This is because there are lots of people looking to buy houses currently. This is creating a very competitive environment, and driving up house prices.
But, this doesn’t mean you should immediately write off buying. Most newspaper headlines and indexes look at market trends across the entirety of the UK, rather than giving you information on specific local areas or types of homes. They can often give the impression that all homes are getting more expensive, when actually that’s not the case everywhere.
For example, many buyers are looking to purchase properties in commuter towns, suburbs, or countryside areas, at the moment. This means that there’s a lot less competition for homes – particularly flats – in city centres, so prices there are lower.
If you’re curious about the price trends in a particular local market, this tool can show you what’s going on.
Stamp Duty holiday
Part of the reason there are so many people interested in buying a property currently is because of the temporary Stamp Duty Land Tax holiday on properties under £500,000. Announced earlier this year, the Stamp Duty holiday means that buyers can save up to £15,000, if they complete their purchase before 31st March 2021. That’s a pretty enticing reason to buy quickly!
But, the benefit isn’t evenly spread.
First time buyers don’t usually have to pay Stamp Duty if they buy a property that’s worth less than £300,000. This means if you’re buying for the first time, you’ll only benefit from the holiday if you’re purchasing a property worth more than £300,000.
There are also some pretty confident predictions that many sellers (or their estate agents) will add at least some of the Stamp Duty savings onto their property’s asking price. The Office of Budget Responsibility predicted that the Stamp Duty holiday will increase house prices by at least 0.5%.
So, if you’re considering moving soon, take the time to think carefully before you rush to take advantage of the Stamp Duty holiday. You may find out the benefit is limited.
You shouldn’t ever feel pressured to buy just because the market looks ‘right’. It’s just as – if not more – important to consider whether it’s the right time to buy a house for you personally. A house is likely to be one of the largest purchases you’ll ever make, so take the time to ask
yourself the following questions first:
- Does buying a house fit in with your financial and personal goals?
- Once you’ve paid your deposit, and legal fees, will you still have ‘buffer’ savings left in case of an emergency?
- Do you feel secure in your job / are you planning to make a large career change in the next couple of years?
- Are you ready to commit to the fixed term period of a mortgage?
- Will you be able to consistently pay your monthly mortgage payments?
Questions like these should be considered with as much importance as the general conditions of the housing market. If you’re unsure about whether you’re making the right decision, talk to an independent, objective, financial advisor. They will be able to provide advice and support tailored to your personal situation and goals.