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UPDATED: Is now a good time to buy a house?

author: Sarah Beresford

By Sarah Beresford

The housing market is constantly changing from one month to the next. Throw a global pandemic into the mix, and it can feel more uncertain than ever.

Despite the pandemic, the UK House Price Index has shown a slow but steady increase in property prices in the last year.

It’s had a few dips, but generally, prices are higher now than they were this time last year. The main boost is likely due to the stamp duty holiday and the re-introduction of 95% mortgages to the market, due to the Mortgage Guarantee Scheme mentioned in Budget 2021.

So, is now a good time to buy a house?

If you were already planning on buying, and you’d benefit from the Stamp Duty holiday, then now’s probably a good time to buy. Don’t move just for the sake of saving on stamp duty, as not everyone will benefit from the relief.

While the full Stamp Duty holiday ends at the end of June (so you'll have to be quick to make that), there is still a saving to be had before October 2021.

For completions before 30 June, stamp duty on the first £500,000 of a home has been scrapped, which is saving people thousands. From July to September, the threshold drops to £250,000, so there are still big savings to be made before it returns to the regular threshold of £125,000at the start of October.

However - it's worth considering that when the stamp duty holiday ends, it could lead to house prices decreasing, as demand should go down. 

Spring’s traditionally a buoyant time in the housing market, as people often look to move before the start of the summer. During this time, there's usually more choice on the market which can push prices down. Bear in mind that increased demand often leads to an increase in prices.

5% deposits are back

Thanks to the pandemic, mortgage lenders started requiring larger deposits for house purchases for added security. Deposit prices were upped to around 15%, and many found it hard to move on the property ladder. The government's now backing lenders, with the 95% Mortgage Guarantee Scheme. Several banks have already signed up for this scheme, including:

  • NatWest
  • Barclays
  • HSBC
  • Lloyds
  • Santander.

95% mortgages are still subject to the usual credit checks, but it means that you'd only need to save a 5% deposit to help you get on the ladder. The scheme is set to last until the end of 2022.

Assessing the housing market

The UK House Price Index is a good place to start when getting a feel for the housing market. It will tell you how property prices have performed over the last 12 months, and you can break it down by property type. For example, it will tell you that the average semi-detached house cost £219,811 in February 2020, while in January 2021, that price has risen to £241,084. It can't predict what will happen in the future, but you can use the data to compare the changing prices.

It's also a good idea to keep an eye on property sites such as Rightmove and Zoopla. Keep checking the recent sold prices in the area you want to live, to see how the market's changed.

What’s likely to happen over the rest of 2021?

With buying incentives like the stamp duty holiday and the 5% deposit scheme, the housing market is likely to stay active in the short term. It could lead to prices going up, but as things start to settle and we come out of lockdown, the market might slow down towards the end of the year.  It's likely that when the stamp duty holiday ends, there could be a knock-on effect, resulting in prices dropping if demand decreases.

When is the best time to buy?

  • Typically, the height of summer when people are away or Christmas when people are busier than usual tend to be the best times of year to buy. With less demand, there's less competition meaning prices should usually be lower.
  • Your personal circumstances will also dictate when it’s the best time to buy a house. Moving is often stressful, so avoid buying at other times of stress, like around the time of a wedding or if you're having a baby.
  • When you want to apply for a mortgage, showing you're financially stable is best, so try to avoid buying a house when you've just changed jobs or if your credit score needs some improvement.

You should always seek financial advice from a mortgage adviser and make sure that what you choose is right for you.

Read on to find out how long it takes to buy a house.

Disclaimer: All information and links are correct at the time of publishing.

author: Sarah Beresford

By Sarah Beresford