House prices rose 2.1 percentage points in the year to July, according to Nationwide. While mortgage rates might be falling, this will not be welcome news for aspiring homeowners. Here we explore whether now is a good time to buy or if should you wait.
The average price of a property in the UK increased by 2.1% in the year to July. That’s fastest rate of growth since December 2022, according to Nationwide.
It also put the average price of a home in the UK at just over £266,000.
Halifax, the country’s largest mortgage lender, has reported a similar trend. In the year to June, it reported a 1.6 percentage point rise in the average cost of a home – or an increase of around £4,500 in value.
So will this trend continue, and does it mean is it a good time to buy a house?
This article includes:
Read more: Will UK mortgage rates go down?
What is happening to house prices?
The housing market lost momentum in 2023, and prices began to fall as high mortgage rates and a lingering cost of living crisis hit household budgets. Nationwide reported a 1.8 percentage point fall in prices over the year.
However, 2024 is proving to be a different story. Prices are remaining stable and this is due to a subdued market, according to Amanda Bryden, Head of Mortgages at Halifax.
“For now it’s the shortage of available properties, rather than demand from buyers, that continues to underpin higher prices,” she explained.
Bryden then said Halifax expects house prices to rise modestly across the rest of the year into 2025. For deeper analysis on house prices, read this guide.
Looking for a mortgage? Work out how much you can afford with our free calculator.
How are average house prices calculated?
Once a month, Nationwide, Halifax, Rightmove and the Office for National Statistics (ONS) publish figures on average house prices. We outline how the figures are calculated in the table below.
| Source | How the figures are calculated |
|---|---|
| Halifax | Halifax uses data of house purchase transactions it has financed to measure market changes |
| Nationwide | Nationwide uses data from mortgages it has approved to generate the cost of a typical house |
| Rightmove | 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 | The Office for National Statistics uses data from the Land Registry to record changes in the property market |
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What caused house prices to fall in 2023?
House prices fell for six consecutive months in 2023, according to Halifax, largely 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.
These rising rates make it more expensive to borrow money which means fewer potential buyers can afford mortgages.
If you take out a two-year fixed-rate mortgage now with a 10% deposit, average rates are around 5.5%. On a £200,000 home loan, average repayments would be approximately £1,228. That’s almost 50% more than in November 2021, when a similar mortgage would have cost you close to £900 a month.
Where are the five cheapest places to buy a house in the UK?
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 marked a change.
The house market is resilient. Mortgage approvals for house purchases rose from 49,300 in November to reach 50,500 in December, according to the Bank of England. House prices started to rise again at the end of the year.
Find out more about current predictions for the property market.
Is now a good time to buy a house?
In an ideal world, you’d buy when both house prices and mortgage rates reach a low point. But it’s unlikely you’d time the market perfectly, so you need to consider a price point for both that is comfortable for you.
You can use forecasts and existing data to help you make your decision. While mortgage rates have fallen since the summer, they rose slightly in February.
The current average two-year fixed rate mortgage rate is now just above 5.77% – a figure which has fallen. Our article on the best mortgage rates documents this trend in more detail.
Remember that buying a property is likely to be one of the biggest financial commitments of your life, if not the biggest. So if you’ve built up the finances and you find a property in an area you’re happy to live in for several years, the time could be right for you.
The advantage of living in a home that you’ve chosen and can change to meet your own needs can dwarf the benefits of waiting to see what happens in the market in the hope of saving an unknown amount of money.
It is important to consider your financial and personal situation holistically and do some scenario planning. Are you planning to have children or get married, buy a dog or any other factor that may affect where you want to live and your future income?
Read more: Will house prices fall in 2024?
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 thinking of buying your first home but you’re worried about mortgage rates and house prices, here are some of the arguments for and against buying property 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. There are suggestions that rates will continue to fall throughout 2024, in line with the Bank of England’s base rate
- 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 or needed to sell your home
- If the forecasts are correct and house prices do indeed continue to fall, waiting will mean you don’t need such a big mortgage. The minimum deposit required by the lender may also be smaller
- If you’re able to live somewhere paying little or no rent, with family for example, this can give you breathing space to save for a deposit. Then you have the option of buying a more expensive property, or increasing your equity in your future home which makes 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 rent increases or potentially having to move out before you want to.
- 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 December. Owning property shields you from these changes
- The general consensus is that house prices continue to rise – albeit at a more subdued pace – over the next year
- If you think you will want to stay in your home for at least three years then you could ride out any downturn in house prices
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 and 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 £1,260 in January 2024, according to HomeLet
- Excluding London, the average rent in the UK is now £1,059 a month
- Average rents in London are more than twice that of the rest of the country at £2,081, which is up 4.6% in a year
- The northeast remains the UK’s cheapest area to rent in, at an average cost of £655 per calendar month
According to November 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 and 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 involved in buying a house include legal fees and 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. We have more on this in our article: what are the hidden costs of buying a house?
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