Buyer's Guide

BUYER’S GUIDE

Should you buy now or wait?

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WORDS Josh Woodfin Property Journalist

s any prospective buyer

Awill know, this is not an easy question to answer. Personal factors are as important as market factors when it comes to making a decision as big as this. First-time buyers are in a different spot to those looking to downsize from a large family home and perhaps make a move to the coast or countryside.

The only sure fire piece of advice, regardless of your spot on the ladder, is to do your own research, and arm yourself with the facts, however fast they might change. Understand your market: where do you want to buy; What do you want to buy? Do you have a deposit ready? Do you have a mortgage in principal? Only when you’ve explored all avenues, and made yourself as ready as you can ever be, should you even consider pulling the trigger and making an offer, or putting your existing house on the market.

But that doesn’t answer the question posed at the start of this article. So, let's zoom out and see if we can offer some information about the current state of the market.

Zoopla said in its July housing index that it had readjusted its outlook, and the UK is on track for 1.3 million sales in 2022, with a house price growth of 5%

A report from Nationwide in July stated that the housing market continued to grow, as house prices rose by 0.1% over the month. This marked the twelfth successive monthly increase in house prices this year. That puts the rate of annual house price growth at 11%, up from 10.7% in June, which has kept annual price growth in double digits for a ninth straight month. Zoopla said in its July housing index that it had readjusted its outlook, and the UK is on track for 1.3 million sales in 2022, with a house price growth of 5%. This highlights the continued interest from committed buyers, even through the usual summer lull.

But that’s not the end of the story. Zoopla expects the rate of growth to slow over the second half of the year, but not as fast as some may expect. Richard Donnell, executive director of research at Zoopla, reports that “the ongoing impact of the pandemic continues to support a desire to move among home buyers”.

This is a big reason why the market is not slowing as fast as some might expect and demand remains for sensibly-priced homes, especially in more affordable areas. Donnell also states that “the housing market is not immune from higher mortgage rates which we are starting to see increase quickly. Buyer interest is expected to slow over the coming months as people tighten their belts and spend with more caution which will see price growth weaken further."

With interest rates set to increase again, and further energy price rises expected in October, many buyers will be reassessing their situations, and may choose to bide their time. House prices continue to increase due to residual effects from the pandemic, like the stamp duty holiday and the continued

Fulham VS Outside of London

What does the same Fulham budget get you outside of London?

Harwood Road

£750,000 | £1,138 / sq ft 2 Beds | 2 Bathrooms 659 sq ft | 61 sq m Ground floor garden flat Bournemouth, BH8

£700,000 | £361 / sq ft 4 Beds | 2 Bathrooms 1,939 sq ft | 180 sq m Detached house

Swan Mews

£995,000 | £1,203 / sq ft 2 Beds | 2 Bathrooms 827 sq ft | 77 sq m Mews house

Fabian Road

£1,450,000 | £771 / sq ft 4 Beds | 3 Bathrooms 1,880 sq ft | 175 sq m Terraced house

Clonmel Road

£3,400,000 | £1,088 / sq ft 6 Beds | 5 Bathrooms 3,124 sq ft | 291 sq m Terraced house

*All properties outside of London were sourced from Rightmove.com

York, YO30

£900,000 | £334 / sq ft 4 Beds | 3 Bathrooms 2,694 sq ft | 250 sq m Detached house

Devon, TQ7

£1,500,000 | £622 / sq ft 4 Beds | 3 Bathrooms 2,413 sq ft | 224 sq m Detached house

Oxford, OX1

£3,400,000 | £630 / sq ft 8 Beds | 7 Bathrooms 5,401 sq ft | 501 sq m Terraced house

race for space. There have also been changes to mortgages in August, with the scrapping of the affordability test, which could open the door for some first time buyers and freelancers. The pandemic, specifically the stamp duty holiday and race to buy before the deadline, also led to housing stock reaching massive lows. But that too looks to be correcting, albeit slowly. In June, Rightmove said the number of enquiries from potential sellers has reached its highest level since January, potentially indicating an increase in stock.

Which takes us full circle back to the initial question - should you buy now or wait? In short, if you have everything in place, or you need to move for a specific reason, you should consider going for it. House prices may fall, but it’s unlikely there will be a crash that would lead to a hypothetical bargain. Conversely, if you’re in no rush, then waiting is a good option too. You can hold out for either for price you’re comfortable with, or that perfect home you’ve dreaming of.

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FINANCE

Finance

As the summer comes to an end, the mortgage market has continued at a busy pace, despite the increase of Fixed Rate Mortgages across all levels and periods.

WORDS JAMES MUNCASTER Chagnon Financial

Since last year the SWAP rate for 2-year fixed rates have risen dramatically – from 0.27% to 2.80% (11th Aug 2022). The same is true for longer term rates, with 5-year rates moving from 0.46% to 2.50%. Alongside wider increases in the cost of living and Base Rate rises by the Bank of England, this fast increase has meant that borrowing is now more expensive.

For those clients that have been looking to buy, this change of cost can come as a surprise. It could mean a re-assessment of their buying power. Clients hoping to re-mortgage will also be finding the price change startling. It is advised that you look at any mortgage agreements closely, and give yourself enough time to do so properly.

If you’re hoping to get a mortgage, there are lots of factors to think about, particularly while the market is unpredictable. For example, you may be weighing up a long term versus short term fixed rate. Whether you go for a 2-year or 5-year fixed rate, it always been based on both price and circumstance. But it may be worth bearing in mind that, unusually, at the moment the 5-year fixed rate costs less. If you’re thinking about moving, or paying down your mortgage before 5 years, there are some things to keep in mind. You normally have a 10% overpayment allowance, but if this is not enough, some lenders will allow you to split the loan and have part on one lending rate and part on another. You can also “port” the mortgage to a new property (i.e. take it with you), but the bank will assess your ability to take the loan over based on income/ expenditure rules at the time.

You may be considering whether an interest-only mortgage is option. This will be based on your income and deposit/equity level. You will need a strategy to pay back an interest-only mortgage but, but it can be useful for clients who get some income through bonuses or commissions, or have other investments and savings. For some, interest-only can make for a good cash flow and allows them room on their monthly payments, with a strategy to pay down the mortgage in stages (using the 10% allowance).

It may feel harder to get a mortgage now, but the fundamentals of borrowing have not changed. However, banks do have to take into account the increase in interest rates and the overall cost of living. This means that “like for like”, you may find it harder to borrow. In light of this, some banks have increased their Income Multiples, and others have looked to increase how much variable income they can take into account (e.g. going from taking 50% of a bonus to 60%). The key, as always, is to make sure you have your paperwork ready to go, and you can provide the right evidence to secure your loan.

If you are self-employed, you may be worried that the state of the market will mean you won’t be able to secure a loan. It is possible. The issue that banks encountered during the pandemic was the sustainability of income had decreased. As we move forward from the initial shock of lockdown, and as clients’ accounts are showing a “post pandemic” picture, some lenders are starting to look at that year in isolation. This is good news for self-employed borrowers who had to ride out the uncertainty during the pandemic.

Since last year the SWAP rate for 2-year fixed rates have risen dramatically – from 0.27% to 2.80% (11th Aug 2022). The same is true for longer term rates, with 5-year rates moving from 0.46% to 2.50%.

Ultimately, the best advice is that no buyer is the same as another, so make use of a Mortgage Broker and get the right advice.