Volatile mortgage rates in recent weeks have made it difficult for prospective homebuyers to know whether they should buy now or hold on until they fall or stabilise.
Despite the Bank of England’s Monetary Policy Committee voting to lower the base rate from 5% to 4.75% in November, some lenders have raised their mortgage rates in the past few days, expecting rates to remain higher for longer following the Budget.
Rachel Springall, finance expert at Moneyfactscompare.co.uk said: “The Autumn Budget has cast doubt on further rate cuts. The measures announced in the Budget, including tax hikes and increased Government spending, are predicted to cause higher-than-expected inflation in 2025, so the Bank of England is likely to be cautious about dropping the base rate too quickly.”
If you are hoping that mortgage rates will fall further, you might be considering postponing your purchase for now. On the other hand, if you feel that rates are as low as they’ll get for the foreseeable future, or you’ve had a change in circumstances that means you need to move, you might be feeling pressed to buy as soon as possible.
It’s hard to know exactly what to do, especially as none of us knows what the future holds, but to help you make the decision, we’ve put together this article with some key points to consider.
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
Mortgage market overview
The average asking price for a property stood at £293,999 in October 2024, according to the latest figures from Halifax, up 3.9% compared to the same month a year earlier.
Meanwhile, the average rate on a two year fixed-rate deal stood at 5.39% in November, according to Moneyfactscompare.co.uk, and 5.09% for five year fixed-rates, down from 6.29% and 5.86% respectively in November 2023.
Amanda Bryden, head of mortgages at Halifax, said: “Looking ahead, borrowing constraints remain a challenge for many buyers. Following the budget, markets expect the Bank of England to cut rates more slowly than previously anticipated, which could keep mortgage costs higher for longer. While we expect house prices to keep growing, it will likely be at a modest pace for the rest of this year and into next.”
Do you own property already or are you buying for the first time?
One important variable that might make a difference to your decision is if you’re already on the property ladder, or you’re buying for the first time.
If you’re buying for the first time, perhaps because you’ve previously always rented, and you don’t have to make your purchase now, you may decide you want to continue to rent for now so you can see how things unfold. With the market volatile, there’s a chance you could regret throwing your hat into the ring too soon, particularly if property prices end up falling and interest rates go down. Equally however, rates may not come down for some time, and it may not be practical to wait.
As well as considering mortgage rates, prospective buyers also need to remember that Stamp Duty thresholds will fall from April 2025 after the Government decided not to extend the relief.
Under current rules, first-time buyers benefit from reduced Stamp Duty rates if they purchase a property valued at £625,000 or less. No stamp duty at all is payable on the first £425,000 of the value of the property and after that buyers must pay 5% stamp duty on any remainder up to £625,000. However, from 1 April 2025 first-time buyers will only get the first £300,000 of the value of the property stamp duty free, with 5% paid on any remainder up to £500,000.
Those moving on to their next home will also pay more, but will face a less severe hike. Currently the first £250,000 of a property purchase is free of Stamp Duty. However, from April only the first £125,000 of a property purchase will be Stamp Duty free, with a 2% rate charged from £125,000 to £250,000.
The changes means many buyers may rush to complete their property purchase as soon as possible to avoid paying more Stamp Duty, although it’s vital not to rush into making a decision if you’re not 100% convinced you’ve found the right property for you.
Oliver Dack, Spokesperson for Mortgage Advice Bureau, said: “We’ve been encouraging borrowers to tune out scrutiny of the Budget itself and instead focus on their own circumstances; in most cases, those looking to move home or refinance can continue as planned but should consider seeking advice if they have any concerns,” explained. Learn mortgage about the Budget changes in our guide What the 2024 Budget means for stamp duty and property.
If you already own a property and are thinking about moving, you might be on your lender’s standard variable rate (SVR) whilst looking for your next home. While there’s no surefire way of telling which way the market will move next, SVRs remain painfully high, with the average SVR currently at an eye-watering 7.95%.
This could be an argument for closing on a new property sooner rather than later if you’ve found a competitive mortgage deal. Alternatively, if you postpone buying, you can still remortgage but choose a deal which is portable so that you can take it across to your new property if you need to. Read more in our article When is the best time to remortgage?
Do you have a particular property in mind?
Another factor to consider is how far along in the homebuying process you are. If you’re toying with the idea of buying a home but aren’t sure, then you might decide to wait and see what happens over the next few months.
On the other hand, if you are committed to buying a specific property that you really want, or next year’s Stamp Duty changes will significantly impact you, you may want to press ahead regardless. After all, no-one can predict the best time to buy and the perfect home doesn’t come around often, particularly with a limited amount of affordable properties on the market in the first place.
Biting the bullet and buying now might see you pay a higher price than you would have a year ago, but could be preferable to buying a few months later for even more – or losing out on the property altogether.
For tips on making a successful purchase, read our article 11 Common mistakes homebuyers make (and how to avoid them).
Do you have a timeframe that you need to buy within?
Waiting isn’t always a luxury that everyone has when it comes to finding a place to live. If there’s a particular timeframe that you have for buying – perhaps because your relationship has ended and you need to move, or you’re renting and have already handed in your notice to your landlord, or because you need to downsize to free up some capital – this might factor into your decision. Find out more about divorce and your home in our guide Splitting the family home and mortgage during divorce, dissolution or separation.
However, it bears repeating that you shouldn’t let yourself be rushed into buying a place that isn’t right for you. If you want or need to move out soon but can’t find the right place to buy, it would probably be much wiser to try and rent somewhere for a while and take your time choosing a property. For more guidance, read our article Renting or buying – which is right for you?
Have you explored ways to bring down potential mortgage costs?
If you’re worried about buying because of high mortgage rates, and you have some savings which you’re not putting towards your property purchase as you want to keep a financial buffer available, you might want to look at ways you might be able to reduce your monthly costs.
For example, you may be considering opting for a longer mortgage term to keep your monthly payments down. Bear in mind, however, that you’ll end up paying more interest overall if you do this, and you’ll need to prove to lenders that you’ll be able to keep up with your repayments into retirement. You can find out more in our guide Mortgages for over 50s: what you need to know.
Another option you could potentially explore might be an offset mortgage, a unique kind of product that lets you link your mortgage with a savings account that you have with the same bank or building society. Doing so means that you effectively give up your ability to earn interest on your savings, but in exchange you can reduce the interest that you need to pay on your loan, or even shorten your mortgage term.
Offset mortgages usually have slightly higher rates than a typical mortgage, but could save you money in the long run if you stand to save more on your repayments than you would earn in interest on your savings. If you are very keen to buy a property, have a decent amount of savings to offset and are looking for ways to make repaying your mortgage a bit more affordable, this could be an option for you to consider. Read more in our article What is an offset mortgage?
Have you received mortgage advice?
Ultimately, there is no universal right answer to the question of when the best time to buy property is. Not only is the market incredibly unpredictable, especially right now, but everyone’s circumstances are so different that there will never be a one-size-fits-all solution. That means it’s usually well worth seeking professional independent financial advice on the mortgage options which are likely to be best for you.
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
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