House prices have fallen by around 2% during the past year, and mortgage rates have also dipped in recent months. This is good news for aspiring homeowners, who may be hoping to snap up a bargain. But with borrowing costs still historically high and property prices continuing to tumble, is now a good time to buy a house?
Increased borrowing costs have had a significant impact on demand for homes, which has caused prices to dip. Nationwide reported a 2% knock in house prices in the year to November, but in September it said prices had fallen by 5.3% in a year.
You may be tempted to take advantage of this year’s dip in prices. However, with analysts forecasting that both house prices and mortgage rates could keep falling in 2024, is it better to wait?
This article includes:
Read more: Will UK mortgage rates go down?
What’s happening to house prices?
The housing market lost momentum in 2023, and prices began to fall significantly as high mortgage rates and a lingering cost of living crisis hit household budgets. According to Nationwide’s house price index, the average house price in November was £258,557. This marks a 2% fall from a year prior.
Property website Zoopla said that average house prices are on track to decrease by 5% over the whole of 2023. In November, it reported that homes were selling for £18,000 below asking price on average. As well as stunted demand, it cited a six-year high of property supply as a key reason for this.
This represents a stark change for the UK housing market, for which a 10% year-on-year increase hasn’t been unusual during the past decade.
Nonetheless, the property market isn’t suffering quite as much as many predicted it would this time last year.
Looking for a mortgage? Work out how much you can afford with our free calculator.
Once a month, Nationwide, Halifax, Rightmove and the Office for National Statistics (ONS) publish figures on average house prices. We outline the latest figures in the table below.
| Source | House price figures | How the figures are calculated |
|---|---|---|
| Halifax | November House Price Index: Av price £283,615; +0.5% since October; -1% over the year | Halifax uses data of house purchase transactions it has financed to measure market changes |
| Nationwide | November: Av house price £258,557; +0.2% since October; -2% over the year | Nationwide uses data from mortgages it has approved to generate the cost of a typical house |
| Rightmove | November: Average new seller asking prices -1.9% to £355,177 – larger than 20-year average of 1.5% | Rightmove uses house prices agreed at the point when a mortgage is granted for properties listed on its website to provide its house price index. It has a much larger sample size than both Halifax and Nationwide |
| The ONS | October: Av house prices £288,000 -1.2% in 12 months to October 2023 (provisional estimate) | The ONS uses data from the Land Registry to record changes in the property market |
What has been causing house prices to fall?
House prices have been falling predominantly because of the squeeze on household finances, caused mainly by the cost of living crisis and rising mortgage rates.
Between December 2021 and August 2023, the Bank of England raised the base rate 14 times from 0.1% to 5.25%. This is its highest level since April 2008.
For someone taking out a two-year fixed-rate mortgage with a 10% deposit, average interest rates are close to 6%. On a £200,000 mortgage, average monthly repayments are around £1,290. That’s almost 50% more than in November 2021, when the same mortgage would cost approximately £900 a month.
Rising rates make it more expensive to borrow money which means fewer potential buyers can afford mortgages. In April, the Office for Budget Responsibility (OBR) predicted that house prices would fall 9% over the next two years. They predicted house prices would rise again in 2025.
Read more: Five cheapest places to buy a house in the UK
In the wake of soaring borrowing costs, the number of mortgage approvals has fallen from 49,500 in July to 43,300 in September, according to the Bank of England. This marked the lowest level since January.
Before house prices started falling at the end of 2022, the market had defied the odds. It didn’t just survive but positively thrived. This was caused mainly by pandemic-related factors such as:
House prices had continued to grow since Covid restrictions ended, with unemployment remaining low and demand for properties outweighing supply. But 2023 saw this change.
Mortgage payments remain most affordable for those with a large deposit. This isn’t great news for first-time buyers who tend to have small downpayments.
Nationwide said a 10% deposit is now more than 50% of a typical first-time buyer’s annual income.
Read more: Should I register as an LLC to buy a house?
Experts generally expect house prices to keep falling in 2024. Find out more about current predictions for the property market, and whether house prices will keep falling in 2024.
Is now a good time to buy a house?
It’s tricky to know the ideal time to buy a house, and it’s unlikely you’ll time the market perfectly. In an ideal world, you’d buy at the point in time that both house prices and mortgage rates reach their lowest point.
Unfortunately, there’s no way to know exactly when this will be without a crystal ball. These low points are also unlikely to coincide exactly.
However, you can use forecasts and existing data to inform your decision. Both house prices and mortgage rates have fallen during the past six months. The current average two-year fixed rate mortgage rate is now below 6%. In July, this figure reached as high as 6.86%.
The average house price is currently £258,557, according to Nationwide data. In May, it was £260,736. Almost a year prior, in August, 2022, this figure was £273,751.
Will house prices crash in 2024?
House prices are forecast to continue to dip throughout 2024. Estate agent Savills has forecast a 3% fall in UK property prices in 2024, before a market recovery in 2025. Of course, there is no way to be certain of this.
The Bank of England is also widely expected to start cutting interest rates somewhere in the middle of 2024, which it hiked 14 times in a row to combat soaring inflation. This, in turn, would likely mean that mortgage rates also fall in the coming year.
This means that if this trajectory continues and the base interest rate really has peaked, prospective buyers may find themselves facing the ideal combination of lower house prices and mortgage rates towards the end of 2024 and even early 2025.
Find out more about when interest rates could fall.
If you are looking to buy soon, another consideration is what would happen should there be a further drop in house prices, as is expected over the next year and more. Could a fall wipe out the value of your deposit and leave you in negative equity?
Whether it’s a good idea to buy or hold off will depend on your own circumstances, so you need to weigh up the pros and cons carefully. In the next section we help you decide whether it’s worth delaying your house purchase.
If you are confident that you would be able to keep up the mortgage repayments, buying now might make sense. This is particularly true if you plan to live in that property for some time, rather than treating it as an investment, in which case you would be at the mercy of a market in which prices may not recover in the short term.
There are several red flags to avoid when you’re viewing properties. They aren’t always easy to spot. Whether a house or a flat, these are issues to consider when you’re going on viewings
Should first-time buyers delay buying a house?
If you are looking to buy your first home but worried about mortgage rates and house prices, here are some of the arguments for and against buying a home in the current market.
Yes to delaying your house purchase
- While mortgage rates have fallen in recent months, they are significantly higher than they were a year ago. They’re also projected to continue to fall throughout 2024, in line with the Bank of England’s base rate
- The consensus is that house prices will fall over the next year, so anyone who buys now risks seeing the value of their first home drop
- If you’ve only put down a small deposit and house prices fall, you could end up in negative equity. However, this would only be an issue if you wanted to sell your home
- If the forecasts are correct and house prices do indeed continue to fall, if you wait, you may not need such a big mortgage loan. This means that the minimum deposit by the lender required may also be smaller
- If you’re able to live somewhere paying little to no rent, for example with family, this can give you more time to save for a deposit. This can give you the option of buying a more expensive property, or increasing your equity in your future home and making you eligible for a cheaper mortgage.
No to delaying your house purchase
- If you own your own home, you don’t need to worry about a possible increase in rent, or having to move out at a moment’s notice.
- Living in your own home rather than a rental property means your income goes towards paying off your own mortgage rather than somebody else’s
- Rents are soaring. According to property website Zoopla, average rents for new rentals rose by 9.7% in the year to October. Owning property shields you from these changes
- While there are plenty of predictions about house prices, we can’t know for certain how much they will fall by, so you could be waiting for a long time for them to hit rock-bottom
- If you think you will want to stay in your home for at least three years then you could ride out the suspected downturn in house prices
- You can lower your chances of ending up in negative equity caused by falling house prices by increasing the size of your deposit
- Now could be a good time to find a bargain. If a seller wants a quick sale before rates peak next year then you might find that being a first-time buyer gives you a greater advantage as you have no chain to hold up the process
Read our guide to buying your first home.
Is it cheaper to rent or buy a house?
In the past, it was normal to rent a home in order to save money to put towards buying a place of your own. But rising rental prices, particularly in big cities, have made it very difficult for first-time buyers to save.
According to figures from the Homelet rental index:
- Average monthly rent in the UK was £1,279 in November 2023. This marks a 0.3% fall from the month prior, but a dramatic annual increase of 8.9%
- Excluding London, the average rent in the UK is now £1,066 a month. This is 9.1% higher than a year ago
- Average rents in London are more than twice that of the rest of the country at £2,174, which is up 8.1% in a year.
- The North East remains the UK’s cheapest area to rent in, at an average cost of £677 per calendar month
According to the latest data from the ONS, private rental prices have increased at their greatest annual rate for more than five years, as demand continues to heavily outweigh supply.
Mortgages are also much more expensive than they were two years ago because of rising interest rates, though they have fallen slightly in recent months. Get a rough idea of what you would pay a month with our mortgage repayment calculator.
While mortgage rates remain high, repaying a home loan could still be lower than the cost of monthly rent.
Yet affordability is still a big problem for many first-time buyers, with the average property costing 9.1 times the average person’s salary. In 1997 properties cost just 3.5 times average earnings.
That can make it even harder for tenants to save enough for a house deposit when the payments to their landlord are so high, leaving them stuck in rental properties until they can set enough money aside.
Our guide to whether you should buy or rent a house weighs up the pros and cons.
What mortgage rate will I pay?
The rate you can get from your mortgage lender will be driven by a number of factors, including:
- The size of your deposit
- Your credit score
- The type of loan
- The length of the mortgage deal.
Saving up as big a deposit as you can will increase your mortgage options and help you get the best mortgage deals.
How to find the best mortgage for you
When considering a mortgage, you can choose between:
- Fixed-rate loans: you know exactly how much your monthly repayments will be during the mortgage deal
- Variable-rate loans: your payments could fall if interest rates drop but they could also shoot up if rates rise.
If you’re looking for a mortgage, you might want to speak to an adviser. We outline the top-rated mortgage advisers.
Or Times Money Mentor can help you choose a mortgage with this free comparison tool:
Find mortgage deals with our best buy tool
This is how the tool works:
- You can search and compare mortgage deals
- It only takes a couple of minutes and no personal details are required to search
- Once you’ve got your result, you can speak to a mortgage broker if you need advice
Product information is provided on a non-advised basis. This means that no advice is given or implied and you are solely responsible for deciding whether the product is suitable for your needs.
What time of year is the best time to buy a house – and the worst?
Traditionally, spring is a good time to buy a house because there are more homes on the market.
March is generally a good time to buy a house when the days start to get longer the weather starts to get warmer. Many homeowners who want to sell fast are advised to put their property on the market in March as there are more house hunters.
People are often keen to complete before everyone heads off on summer holidays, leaving August particularly quiet.
Listings, or buying opportunities, pick up again during September and October, before dropping off at the end of the year. This is because homeowners tend to stay put for Christmas.
The worst times to sell tend to be August and December.
Read more: How to sell a house in winter
Relaxing of mortgage affordability rules
In August 2022, lenders were able to remove one of the affordability tests when assessing people for mortgages.
The Bank of England wants to make it easier for home buyers to take out a home loan. It consulted on removing the rule in the first half of 2022 and the change came into effect in August.
Lenders previously had to check that borrowers would be able to afford a 3 percentage point rise in the interest rate on top of their lender’s SVR (standard variable rate).
Introduced in 2014, in the wake of the financial crisis, this rule was designed to stop the banks from suffering hefty losses if borrowers ran into financial difficulty and couldn’t pay off their loans.
It is estimated that 6% of borrowers have had to take out smaller loans because of the rule.
How does removing the stress test affect me?
- It could help more first-time buyers secure mortgages
- Some borrowers will be able to take out larger loans than they otherwise would have
- But there are concerns that this will further inflate house prices by increasing demand
A second affordability rule, which prevents high risk people from borrowing more than 4.5 times their income, will remain in place.
The Financial Conduct Authority, the regulator, will also continue to enforce its own rule which requires lenders to make sure borrowers can afford a 1 percentage point rise in their borrowing.
Looking to buy a house? Be aware of these fees
Costs include legal fees and any banking fees for transferring your deposit. We round up all the costs of buying a house.
Stamp duty can be hefty, depending on the property price.
You may also have to pay a fee if you use a mortgage broker who charges for their service. We have more on this in our article: what are the hidden costs of buying a house?
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