Making decisions can be difficult at the best of times. Buying a home is a big decision, so you can’t be blamed for becoming a little pensive or perhaps even anxious about making your move. Deciding whether you are going to move now or wait and see what happens is a dichotomy for some buyers. As soon as you turn on the news, you will no doubt be bombarded with the cost-of-living crisis, another interest rate rise, or another reason to worry. It’s little wonder some people decide to sit on the fence. But could doing that cost you more money?
Waiting for interest rates to fall may not save you money
There is little doubt that we have been spoiled in the past with ultra-low mortgage interest rates, and many analysts argue that they will never fall to this low level again. Inflation is falling, which will lead to a reduction in interest rates in the near future as the Bank of England expects inflation to fall to 5% by the end of this year.* In the meantime, as interest rates increase by small amounts, if you are not on a fixed-interest deal, your mortgage will increase. But while these small increases may feel unfair and, for some people, mean squeezing their budget, they could be insignificant in the face of rising house prices. Interest rates are also peaking, which means in the not-too-distant future they will come down.
Rising house prices balances your budget in the long run
Most people who buy a home in the UK will keep it for many years. House prices may fluctuate just as interest rates do. Despite the numerous recent rises in interest rates, average asking prices in May this year increased by 1.8%.** Interest rates are peaking, which means they will shortly begin to decrease. As interest rates and inflation continue to fall, house prices will ascend again. So, if you are waiting to see what happens, you run the risk of paying more for the home you want in the future. In February 2013, the average UK house price was £167,682 in February 2023, that figure stood at £288,000. *** Set against this longer-term perspective, if there are sudden and significant changes in the market, the reality for most homeowners is that their properties' value in the long run will cover the cost of these short-term increases in interest rates.
Properties are unique
There are no hard-and-fast rules. Local property markets are layered with unique and differing qualities. Whatever the national economic conditions are, the potential to gain equity in a home due to its condition, location, or potential can secure your investment in the face of challenging times. The possibilities are endless, and there is always room to buck the trend in a big way. The only limit is your imagination.
There is a huge choice of mortgages available on the market. Knowing that you can change your deal or re-mortgage when interest rates fall again has made some buyers think outside the box. Options such as porting, 35-year mortgage deals, green mortgages, 100% mortgages, and interest-only mortgage deals could decrease your monthly outgoings - if that is a factor when it comes to buying the home you want now. In the grand scheme of owning your home, high interest rate costs will essentially evaporate over time.
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