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

The housing market is constantly changing from one month to the next. So, we investigated if this spring is a good time to buy.  

There are several factors to consider when deciding if it’s a good time to buy a house, including:   

• stamp duty thresholds  

• Mortgage Guarantee Scheme  
• interest rates  
• house prices  

We look at each of these factors to help you get a good overall picture of the housing market as it stands today.    

Remember, you should always seek financial advice from a mortgage adviser before you apply, to help you make the right decision based on your individual circumstances.     

Stamp Duty Land Tax (SDLT)   

To keep the housing market going and motivate people to buy and sell during the pandemic, the government introduced a stamp duty holiday in July 2020. This scheme began to taper off from July 2021, and eventually ended in October 2021. Now, stamp duty rates are back to normal.     

This means you won’t need to pay a penny of stamp duty on a house worth £125,000 or less, but stamp duty will apply to any amount above this figure.   

For example: If you buy a house worth £300,000. The stamp duty you owe will be calculated as follows:   

• 0% on the first £125,000 = £0  

• 2% on the portion from £125,001 to £250,000 = £2,500  
• 5% on the remaining £50,000 = £2,500  

Totalling £5,000  

Use this stamp duty calculator to work out how much SDLT you’ll need to pay for your new house.  

Do first-time buyers get stamp duty relief?   

Yes, if you are a first-time buyer in England and Wales or Northern Ireland, you will benefit from stamp duty relief on a residential property worth £300,000 or less (as long as you intend to use it as your main home). Stamp duty relief for first-time buyers has been in place since 2017.   

This means you won’t need to pay any stamp duty if the property is worth £300,000 or less. But you will pay 5% SDLT on any value between £300,001 and £500,000. Standard rates apply on values above £500,000.   

When do I pay stamp duty?  

Your solicitor will provide you with the invoice for stamp duty and you have 14 days after completion to pay it.  

Will house prices drop in 2022?  

According to the Land Registry, UK house prices have risen by 9.6% between January 2021 and January 2022 - to £273,762 on average.   

We're also in the spring home-moving season - the peak time for buyers and sellers to make their move onto or up the property ladder.  

However, some people speculate that house price growth will begin to slow down as the year goes on - though Rightmove state that demand will still outstrip supply, even so. 

5% deposits are back   

Due to the pandemic, mortgage lenders started asking for larger deposits as a means of security. Deposit prices were upped to around 15%, and many people found it hard to save enough to get on the property ladder.    

So, in April 2021, the government introduced the 95% Mortgage Guarantee Scheme, which reduces the risk to lenders – making them more willing to accept smaller deposits, as low as 5% deposits.  

95% mortgages granted under the Mortgage Guarantee Scheme are still subject to the usual credit and other checks, but this means that you'd only need have 5% of your potential new home's value saved up as a deposit to help you get on or move up the ladder.   

Several banks have already signed up for this scheme, including:   

• NatWest  
• Barclays  
• HSBC  
• Lloyds 
• Santander 
• Virgin Money  

The scheme is set to last until 31st December 2022.    

Mortgage rates are rising   

Mortgage interest rates hit record lows in 2021 – with some of the most competitive deals offering rates at less than 1%, although these tended to be reserved for those with at least a 40% deposit. But, with the Bank of England interest rate rising to 0.75% in March 2022, mortgage interest rates appear to be on the rise. 

There are also other fees that you should consider too, such as booking fees and arrangement fees, for example. It’s a good idea to include these fees in your calculations, so you can see the true cost of the deal you’re offered.    

Remember, if you wrap any fees you have to pay into your mortgage loan, you will be paying interest on them for years to come. So, it can work out cheaper to pay for fees upfront instead.   

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 changed over the last 12 months, and you can break it down by property type. It can't predict what will happen in the future, but you can use the data to compare periods of time and spot trends.   

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

When is the best time to buy?   

If you’re looking to buy soon, consider the following points:   

• 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.   

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

Disclaimer: This information is correct at the time of writing, 11th April 2022.