When is the Best Time to Buy a House?

cropp77

For first-time buyers, a volatile market might offer opportunity, but the fear of making the wrong step is very real.

For years, the housing market seemed indestructible. Not even the pandemic could put a dent in it. In 2024, though, things look flat. Prices fell in 2023 and most experts expect the slump to continue throughout most of the year.

For those of us looking to buy a house, it could be a case of opportunity knocks.

Unfortunately, it’s not quite as simple as that. In a volatile market, buyers can be forgiven for feeling nervous. Buy too early and prices may slump putting you at risk of negative equity. Buy too late and you may miss your chance. Moving interest rates means the cost of borrowing can change dramatically

depending on when you buy. So, if you’re looking for the best time, what should you do?

Changing house prices

The first thing is to look at the data, almost all of which shows a housing market that is on the slide. According to Nationwide, overall house prices fell by 1.8% in 2023 compared to the year before. However, prices varied according to location.

London saw the biggest drop of 6% while some areas reported a 20% fall. A report in the Telegraph, meanwhile, suggests sellers are being forced to slash their asking prices by up to 10% as the housing market stagnates.

Prices are stagnant everywhere, but the exact extent of the decline varies from place to place, which means we have to keep an eye on the local market – not just those

national figures.

The key question, though, is when will the market bottom out? For that, we need a crystal ball, but without that, the best we can do is draw on existing market data and expert opinion.

Most experts expect a stagnant 2024 for house prices. Data from Zoopla predicts a further 2% decline. Estate Agents Savills expects the market to fall by 3% before recovering in 2025.

However, experts were saying the same thing this time last year so there’s no guarantee, they’ll be any closer this time around.

What’s more, falling house prices mean nothing if the cost of borrowing is sky-high, which is why we have to look at interest rates.

Rising interest

Between December 2021 and August 2023, the Bank of England hiked interest rates a record 14 consecutive

times to 5.25%, the highest in 15 years. With it has come a rise in mortgage payments. The Nationwide’s report says that a borrower earning the average UK income and buying a typical first property with a 20% deposit could have monthly mortgage payments of around 38% of take-home pay, compared to the average of 30%.
Any gains from falling house prices will be wiped out until interest rates

start to come down, so when will that be?
To answer that question, we have to second-guess the minds of decision-makers in the Bank of England. Since the last hike in August, interest rates have remained steady. Inflation has started to fall which means many people will be hoping for a rate change shortly. However, it remains higher than the bank’s 2% target.

In December, inflation rose slightly to 4% from 3.9% the year before.

Most experts believe rates will be coming down, but opinion is divided about when. Those countries that hiked rates earlier are already coming down, but the timing is open up debate. A poll from Reuters found a slim majority expecting a rate cut from the summer of 2024 onwards.

Picking your time

Taking the expert predictions, then, you might pick the end of 2024 or the early part of 2025 as being the sweet spot of falling interest rates and low prices, but so much depends on how the economy fares over the next 12 months and not even the experts can be confident of that.
If you’re looking to buy then, the best bet could be to stay flexible, get your finances in order, and keep a close

eye on interest rates and your local market. Everyone’s decision will be unique to them, so if you’re trying to pick your moment to buy let us know the questions you’re looking at and how you’ll be making your decision.