If you’ve been thinking about moving house, recent headlines may have you worried. News of sky-high inflation and a turbulent mortgage market have persuaded many buyers to postpone their move. However should you be one of them?
There’s no denying that the property market is currently in a bit of a tailspin. Climbing interest rates and inflation are undoubtedly having an impact on homebuyer’s affordability. Both in terms of how much they can borrow and how much they are willing to pay. We have already seen property prices begin to drop, and most property experts are predicting further falls in coming months.
So, are things really as bad as they might first appear? And is now a good time to move?
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Interest rates
It’s true that interest rates have risen steeply, and they’re expected to continue to rise. However, historically, the predicted interest rates would still be comparatively low. We have got used to the low interest rates that have been seen over the last few years. In comparison, this rise to more usual levels feels like a steep hike. Whilst many homeowners and would-be buyers will be hoping that this rise in interest rates is a temporary move to counteract rising inflation, economists are suggesting this is a return to ‘normal’ levels and we should expect interest rates to remain at around 5-7% for some years to come. Many are questioning whether we’ll ever see a repeat of the low interest rates we’ve seen over the last 10 years.
With this in mind, if you’re thinking of postponing your move to ‘see out the storm’, you may be disappointed. This storm may be here to stay, so it’s worth thinking through your onward plans assuming that interest rates will stay at this level, and perhaps rise even higher.
Property prices
Property prices are already starting to be impacted by the rise in inflation and interest rates. We’ve just seen the second consecutive month of falling property prices, and it’s likely that this trend will continue in the coming months, potentially falling more sharply than they are at the moment.
What does this mean for your house move?
Many sellers are already becoming wise to the drop in demand and affordability, and are much more open to the idea of accepting a lower price to keep their move on-track. This will have to continue if homeowners want to sell. The most appropriate advice here is to look carefully at your own finances. What can you comfortably afford, even with rising interest rates? How long do you intend to stay in your next property?
If you’re a first-time buyer, it may be sensible to wait a few months and keep a close eye on the market. To move up the property ladder, the trend will be the same throughout the market. So if you sell your current home at a lower price, you’ll also be able to buy your next home at a lower price. However, if you can comfortably afford the new home, and you intend to stay in it for a long time, it might still be the right time for you to move.
Sale success
New figures from Quick Move Now suggest that 40% of property sales are currently falling through before completion, largely due to buyers getting cold feet or having difficulty securing a mortgage. As the economy gets more challenging, it’s important that you vet your buyers carefully. Do they have a reasonable size deposit available? Have they already been given an agreement in principle from their lender? Do they have a strong need to move? If the answer to any of these questions is ‘no’, you might be wise to stay on the market until a stronger buyer comes along, to save yourself time, money and heartache.
There’s little doubt that the UK property market is currently in a period of turbulence, and there’s a great deal of concern about the future. For many people, current circumstances will mean it’s right to put their plans on hold whilst they secure their financial position. For others, their need to move will remain strong and the next few months could present an opportunity to take advantage of falling sale prices and get a foot on the ladder. It’s important to look at your personal circumstances and how much financial risk you’re prepared to take. Always seek the advice of an independent financial adviser before making any important financial decisions.
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