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Is now a good time to buy a house?

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House prices are falling, which could make it a good time to buy a home. But with higher mortgage rates, the amount you can afford might be lower. Here’s what you need to know.

It’s more expensive to borrow money, so house prices are falling

A home is only worth what someone else will pay. And, as mortgage rates have risen, the amount people can afford to borrow has fallen.  

This means house prices are also starting to fall. The property website Zoopla predicts they could be 2-3% lowerOpens in a new window by the end of the year, compared to January 2023.

Why mortgage rates have increased

Mortgage rates are normally based around the Bank of England base rate, which has risen five times this year. This means new mortgages, or those where the interest rate isn’t fixed, have increased as well.

For a £200,000 mortgage, you’ll typically be paying £400 more each month compared to November 2021. See how interest rates affect your mortgage for more information.

The problem with falling house prices – negative equity 

Negative equity is when your mortgage is higher than the value of your home. This happens if your house value falls below the amount you paid as a deposit.

For example, if you buy a flat for £150,000 with a £15,000 deposit and a £135,000 mortgage. House prices fall and your flat is now worth just £130,000, but you still owe your mortgage lender £135,000.

If you then wanted to sell your home, you’d need to have money to repay the outstanding mortgage, plus enough for a new deposit and moving costs.

Should you buy now or stay put?

Whether it’s a good idea to buy now really depends on your personal circumstances. If house prices continue to fall you might not need such a large mortgage or deposit.

But if you’re confident you’ll be able to keep up the mortgage repayments, even if interest rates were to rise further, buying now might make sense. This is especially true if you plan to live in that property for some time, rather than re-selling it soon after.

If it’s an investment property, you’ll need to be prepared for the value of your home to potentially decrease. It may take some time for its value to increase again.

How to get the cheapest mortgage

If you’ve decided the time is right to buy, make sure you’re getting the best deal. In general, saving up a bigger deposit will increase your mortgage options.

Our Mortgage calculator can help you to work out what they’ll cost you. You can also speak to a mortgage adviser.

Paying tax when you buy

You’ll need to factor in the cost of tax when you buy a property or land. Our calculators will show how much you’ll need to pay, depending on where you’re buying:  

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