Is it a good time to buy a house?

There’s never really a right or wrong time to purchase property – it’s usually up to you and your personal circumstances. Nevertheless, with the property market and people’s buying habits being hugely impacted by COVID-19, you might be wondering if now is a suitable time to buy a house.

From unique benefits to take advantage of to the downsides of waiting for surveys and conveyancing to be completed, here we weigh up the pros and cons of buying property in the UK in the current climate.

Should I buy a house now?

There are many reasons why you might be keen to buy property right now. This could be because:

  • You’ve recently changed jobs, meaning you need to sell your current home and relocate 

  • You’ve been saving for a deposit and now have enough to afford a home in your ideal location

  • Your rental period is due to come to an end later in the year, and you’d like to own your own home

While you may have the drive and the means to buy a property, deciding if it’s a good idea is a different story. Many factors come into play when making a financial decision, significantly when both the economy and employment are in a period of struggle. Before starting the house buying process, consider:

  • Your job security – with the pandemic affecting many people’s jobs, you’ll want to make sure yours is secure and that you’ll be able to afford your mortgage payments

  • Your deposit – have you saved up enough to afford a deposit? Ideally, you’ll want to have the largest deposit possible to keep your monthly mortgage payments down 

  • Your ability to pay back your mortgage – while we already mentioned job security, it’s worth considering exactly how much a mortgage will cost you; this is especially true given that taxes are likely to increase over the next year to cover the cost of the government’s COVID-19 relief effort

  • Where you’re buying – everywhere has property market highs and lows; if you have a particular place in mind to buy yet there’s not a lot listed on the market there that’s suitable, it might be better to hold off until the perfect property does come up for sale

When it comes to mortgages, you’ll be able to work out roughly what you can afford using our mortgage calculator or by comparing mortgages between all the top UK lenders.

Why you should buy a house now

If you’ve got your deposit saved and you know you’ll be approved for a mortgage application, you could be in a great position to buy. Other things which might persuade you to take the leap right now include:

1. The stamp duty holiday

Stamp duty is an essential cost to factor in when buying a house. In basic terms, it’s a tax you’ll pay to the government when purchasing any residential property or land.

One good thing to come out of 2020 was the stamp duty holiday when house buyers were offered a break by the government from paying stamp duty on properties worth under a certain amount. If you’re currently looking to buy in England, Northern Ireland, or Wales, all three UK nations have extended their stamp duty holiday until the end of 30th June 2021. Scotland has not continued their stamp duty holiday beyond March 31st.

Because of the current holiday in England, NI, and Wales, you could either end up paying no stamp duty or a reduced amount depending on the property’s value. The thresholds for paying no stamp duty on your property during this holiday period are as follows:

  • 0% stamp duty for properties worth under £500,000 in England or Northern Ireland

  • 0% stamp duty for properties worth under £250,000 in Wales

This stamp duty holiday will only benefit you if you know you’re going to complete on your property before then. It means taking risks with getting things such as your conveyancing completed on time or even keeping your chain intact.

Stamp duty won’t immediately go back to the standard rates in July. You’ll also pay a discounted rate until the end of September. Still, it won’t be as good as the actual holiday valid until June. What’s more, if your sale goes over the stamp duty holiday deadline in either June or September by even one day, you’ll find yourself with extra pounds to pay.

First-time buyer? Stamp duty isn’t something you’ll need to worry about unless you plan on spending over a certain amount of money. Usually, without the stamp duty holiday in place, you’ll pay nothing as a first-time buyer if your property is worth under £300,000 in England or NI, under £180,000 in Wales, or under £175,000 in Scotland. 

2. Lower interest rates

Another way the pandemic has positively impacted the housing market is that interest rates have been at a record low. This means the interest rate on your mortgage is likely to be less than in the future.

Note that you’ll only really benefit from the lower rates of interest in the future if you apply for a fixed-rate mortgage. Why? Fixed-rate mortgages see your interest stay the same every month until the length of your mortgage term is up.

The alternatives are variable rate or tracker rate mortgages when the interest rate is either set by lenders or in line with the Bank of England Base Rate. While these could be relatively low right now, there’s no guarantee they won’t go up in the months ahead. That means your interest – and your total monthly mortgage payments – will increase, too.

3. Mortgage guarantee scheme

While interest rates have been low over the past year, getting approved for a mortgage has become a little trickier, especially if you want anything higher than an 80% LTV mortgage. Thankfully, the Chancellor announced the mortgage guarantee scheme in March 2021. It came into play on April 19th 2021, and is expected to last throughout 2022.

The mortgage guarantee scheme is particularly beneficial for buyers with smaller deposits who need a little help getting on the housing ladder. Put simply, the plan encourages banks and lenders to offer 95% LTV mortgages to those looking to buy properties worth under £600,000. To do this, the government guarantees to cover 15% of the mortgage payments if the mortgage holder is unable to pay for some reason.

This is great news for first-time buyers, mainly because many lenders withdrew their 95% mortgage options at the start of the pandemic. You don’t have to be a first-time buyer to benefit from the scheme, though. It’s open to anyone who passes the criteria and has a 5% deposit saved.

4. An influx of properties in cities

Keen to move closer to all the action or buy in the city you currently work in? With many people moving out to the countryside for outdoor space and more extensive properties, there are now many properties for sale in cities. 

This is excellent news if you want to buy somewhere urban, and it could mean you could get a lower offer accepted if the current owner wants to sell quickly. If you’re hoping to escape to the countryside, though, you might not be quite as lucky.

5. Rising house prices

Typically, house prices have seen a steady rise over the last few years – and experts don’t think that’s going to stop anytime soon. A global pandemic hasn’t seemed to affect prices, either. If you’re thinking of buying in a location which has already seen a massive hike in property prices in recent years, you may not want to delay purchasing any longer than is necessary.

As well as the above benefits, it might simply be a case that now is the right time for you to buy. You could have a decent deposit saved up, already have an agreement in principle in place, or even have found the ideal property for your household.

Why you shouldn't buy a house now

While reduced stamp duty, low interest rates, and the mortgage guarantee scheme are reasons to hop on the housing ladder, it’s worth considering the other end of the scale. Why might now not be the time to buy?

1. The busy property market

The housing market is booming at the moment, with people wanting more significant properties to work from home in and lots of outdoor space. Many put off moving during the height of the pandemic, meaning there’s now a considerable demand, plus there’s the allure of the stamp duty holiday and low interest rates.

While a busy property market can mean more choice, it also means more competition when viewing houses and putting down offers. As a general rule, sellers are more likely to accept your bid if you can move fast and aren’t expected to hold up the chain.

A larger housing market and more people buying than selling can additionally slow down other aspects of purchasing a house, including getting surveys completed.

2. Slow surveys and conveyancing

Many buyers and sellers complain about significant delays in surveys and conveyancing. These are essential to most property sales. Surveys assess the condition of a property, and conveyancing covers all the legal aspects.

Usually, conveyancing is completed by your solicitor on your behalf. However, solicitors are currently busier than ever, and most have a backlog of work to get through. Working from home has also made the entire process a bit slower too. Suppose you want to buy a property quickly because your rental contract is ending or you’re keen to take advantage of the stamp duty holiday. In that case, there’ll be less guarantee that you’ll complete it on time.

What’s more, being slow with paperwork could lead to your chain collapsing or even you losing the house you’ve put an offer down on. This would then mean finding a whole new property and potentially paying solicitor and conveyancing fees all over again. 

Ultimately, answering “should I buy a house right now?” will come down to you. That includes your financial circumstances, what suitable properties are available, and if you have enough time to reap the benefits of limited offers.

Buying property is a huge commitment and not something which should be rushed into. If you’re not sure, you might be better off taking your time and saving up a little bit more for your deposit while you wait.

For more information on the ins and outs of purchasing property, why not look at our extensive how to buy a house guide?

4 June 2021