When to Buy a House: Factors to Consider

Worries about a market downturn shouldn't steer your decision. Instead, focus on why you want to buy and different matters of timing.

Laura Whateley Published on 13 January 2021.
When to Buy a House: Factors to Consider

You want to get on the housing ladder, but is it a good time to buy a house? With the combination of Brexit and the economic impact of the coronavirus pandemic, there’s a risk of a housing market crash.

Prices fell for four consecutive months at the beginning of 2020, according to the Halifax Index, but house prices were still 5.2% higher in August 2020 than they were the previous year.

Meanwhile Zoopla reports a boom in demand from house hunters when the market reopened after lockdown, but predicts agreed sales will be down 15% below 2019. Brexit is expected to put a further dampener on house prices.

Should a market downturn put you off?

Timing a house purchase should be based on more than what is happening to the markets. Property can be a great investment over decades, but try not to focus too much on buying a property to “make” money, or whether you should hold off for a drop in prices. Instead ask why you need a house and whether owning a house now will save you money, and provide more security for you over the long term, regardless of how house prices perform.

One of the biggest arguments for buying property sooner rather than later is that renting is more expensive than repaying a mortgage.

Buying a home could leave the average property owner £352,500 better off over 30 years, even if house prices don’t rise, according to research by trade body the Intermediary Mortgage Lenders Association.

It calculated that monthly mortgage repayments on the average £230,000 home would be £133,700 cheaper than paying rent on a similar kind of property over three decades of living there. On top of that you would have earned £218,800 in equity from paying off an initial mortgage, even one at 95% loan to value.

» COMPARE: Mortgage deals and rates

The benefits of a bigger deposit

Do consider, however, whether holding off will mean you can save a larger deposit.

The number of mortgages available to those with a 5% or 10% deposit decreased at the beginning of the coronavirus pandemic, leaving first-time buyers with less choice. But they are starting to creep back on to the market. Still, many mortgage experts argue that even if you only have a 5% deposit, it might be worth waiting to buy until you have saved up more.

When we looked at two-year fixed rates for a first-time buyer purchasing a £200,000 home with a 5% deposit over a 25-year term, the best available rate was 3.09% — giving a monthly repayment of £910.

However, if a buyer could stretch to a 10% deposit, the best available rate was lower at 2.72%, giving a monthly repayment of just £828.

Get prepped

You should also make sure your credit score is in its best shape before putting in any offers on a property. Give yourself six months to a year, at least, to get things in order, check all three of your credit reports and make sure your outgoings paint a good picture of your spending behaviour.

You might also want to plan around major life changes. Have you just been furloughed? If so, you might struggle to get a loan for a while. Are you about to have a baby, or change jobs? Both could affect your ability to meet regular mortgage repayments or borrow as much as you’d like.

» MORE: How to apply for a mortgage

Could you cash in with a buying incentive?

Keep an eye out for any incentives to buy. To help with uncertainty surrounding the housing market, the Chancellor announced a stamp duty holiday on properties up to £500,000, which will make buying a home much cheaper over the coming months. This will last until March 2021.

If you want to take advantage of a first-time buyer scheme, note the deadlines. The Help to Buy equity loan scheme comes to an end in its current form in March 2021.

» Ready to get started? Learn about the homebuying process

Source: Getty Images

About the author:

Laura is a journalist and author, writing about money since 2008. Including writing for The Times for 9 years. She believes finance doesn't need to be complicated. Author of Money: a user's guide. Read more

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