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Is it time to stop buying homes (temporarily)?

Asking prices for homes reached a record high in September according to the latest Rightmove House Price Index.

The average price of a home being listed for sale in the UK is now £323,530 – up £16,818 compared to a year ago.

To be clear, this is only the asking price and not the final sale price. But as we’ve seen from the Nationwide and Halifax indexes for the last couple of months, the price at completion has gone up too, against all expectations.

While some of this has been down to pent-up demand, much has been due to the stamp duty holiday, which is ending on 31 March 2021.

Rightmove says there are already signs that things are slowing down, and this week the Legal & General Mortgage Club said that if you are looking to buy, you should get things going by 1 November if you’re to have any chance of getting the sale through at all before the stamp duty holiday ends.

With all this in mind, it could be high time to ask whether you should pause house buying for the time being.

There are a few reasons for this, some of which I mentioned in previous weeks.

First, with house prices so inflated, you might be paying more for your new home than you would save in stamp duty.

Second, because prices are so inflated, it could be some time before you recoup the extra expense given that prices are widely predicted to fall once the Brexit transition period and the stamp duty holiday ends

Third, given tighter lending criterion on mortgages, as well as a steady increase on their rates, you might not be getting the best deal right now – especially if negative interest rates do kick in a few months down the line.

And finally, it’s boom time for house buying. But coupled with coronavirus restrictions, it means there are big delays all along the buying chain, whether it’s booking in surveyors or waiting for mortgage decisions. And then there’s the delay over Christmas and New Year. If you missed the stamp duty holiday deadline, will it still be a good deal?

What it means for you…

The last question – whether it’s a good deal – is one you should be asking right now.

Ideally, before you bite the bullet on the purchase, you should turn your hand at being an amateur surveyor. That means comparing sale prices of similar properties in the area, looking at how recently they sold and for how much.

That will give you an idea of how much prices have been inflated, if any, and how much wiggle room you might have to haggle down.

You could always commission a RICS registered surveyor to do this for you of course, to get an accurate picture of how much a property is worth, but then you’d forking out a few hundred pounds for the service. Plus, there’s a delay in booking surveyors right now.

Another thing to think about is how long you’re planning to stay in your home.

After the 2008 financial crisis, it took about six years for property prices to recover to what they were before according to What Mortgage. Then as now, there’s a lot of uncertainty but with one crucial difference – many more people are directly affected this time round.

In terms of whether your mortgage is a good deal, it all depends on your situation. If you’re a first time buyer, things are not looking good. You need a sizeable deposit to start with, and then you need a steady income to boot.

However, if you’re remortgaging, and your income is steady, there are still some good deals to be found.

Looking ahead, though, if negative interest rates kick in, lenders may well be forced to offer even better deals than they are now. So can you afford to wait?

Finally, think about the property you’re buying. If you miss the stamp duty deadline because of delays, is it still a good deal? Or are you rushing into things to make the most of the saving?

There are already calls for the stamp duty holiday to be extended, like the furlough scheme and other business support schemes have been, but there are no promises that it will yet. And if it isn’t, at some point in the not too distant future, house prices will fall – will you get a better bargain then, even factoring in the stamp duty?

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