Should You Buy a House Now, Or Wait Until 2025?

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Should you buy a house now with inflation rates and a high bank of england bank rate or should you wait until a crash is going to happen in the property market. We explore data from Rightmove, Zoopla and more to understand what’s happening in the market and get behind the headlines so you understand the reality of interest rates, houses and more.

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we have a problem sellers still think it’s 2021 and buyers still think it’s 2009 with house prices completely unaffordable for most millions of families remortgaging from their 2% interest rates to unaffordable 6% mortgages where is the property Market heading is it finally time for its cool down or even crash well this graph from Halifax shows the latest house prices in the UK with annual percentage changes going from 10% year on-ear down to minus 4% however this is a little bit misleading we’ve gone through a super hot market so a 4% drop year onye is only scraping the ice of the massive gains that we’ve seen since the pandemic and this graph shows the latest data from the bank of England with both 75% and 90% loan to value mortgages with rates peaking at anywhere between 5.5 to 75% with over 2 million people coming off their 2% fixed mortgages it’s a real shock for households up and down the country with with a lot of people to not only be able to afford the roof above their heads amongst other spiraling costs what’s the data saying right now well UK house prices have fallen for the first time since 2012 with prices down minus 0.4% month of month and creeping towards 5% down year on-year however house price growth ranges from 1.6% in Scotland to minus 1.5% in the Southeast and the eastn England interestingly the south is taking a bit more of a battering at the moment with the Midlands in Yorkshire holding sort of flat that being said demand from buyers is higher at the moment as consumer confidence and Market sentiment improves before we see the annual dip over Christmas and in general the commentary from the House Index reports are saying that buyers are waiting for Price Falls or lower mortgage rates to avoid compromising on their move it’s a bit of a stalemate right now we’re seeing Sellers and estate agents begin to open their eyes a little bit more that they don’t have crazy lines of billers at the door like like two years ago and house prices are now starting to reflect that albeit I still think there’s more to go for sellers to list their houses for more reasonable prices or otherwise expect zero viewings the UK expects mortgage rates to fall slowly in the coming months and once they get below about 4 and 1 half% we’ll see more buyers return to the housing market and this will likely become the new Norm the days of 2% mortgages won’t be seen for a very long time to come asking price discounts are at 4.2% on average the highest level since 2019 so again here we’re seeing a mismatch from the sellers price expectations versus what buyers are actually willing to pay and can afford overall UK house prices are on track to have fallen 2% to 3% over the course of 20123 which is nothing in the grand scheme of things this would leave house prices 177% higher than just before the pandemic and houses are almost a fifth more expensive in 3 years which is Bonkers the bigger problem here is the modest fall in prices is not enough to improve affordability to a level that will boost activity and thus we’re just stuck in this limbo for a lot longer falling mortgage rates are the most likely route to improve housing affordability and bringing buyers back into the market in the next 12 to 18 months and it’s this stalemate and waiting to see which is why we’re not really seeing An Almighty crash and it’s a slow and painful ride downwards until those scales start to balance back out again to something towards what you can call normal thanks to this video’s sponsor invest engine invest engine are leading the way in providing all you need to invest you can build your own portfolio for free and they have some great tools to help you automatically invest weekly fortnightly or monthly they specialize in exchange traded funds which is an ideal way to invest in shares stocks bonds gold and more giving you access to hundreds of companies such as Apple Tesla Nvidia Allin one go plus if you’re not sure what to pick you can use their manag portfolio Serv service where invest engine builds it manages an investment portfolio for you from a range of Investments ensuring that your money is Diversified to help manage risks their ideal for your Isa or pension and setting up an account is free and easy either as an individual or like me under the name of your company then you’re good to begin investing your money into one of the many ETFs that they have to offer through popular investment companies like Vanguard I shares JP Morgan and Wisdom Tree and more if you’re not familiar with the invest engine their accounts are FSS prot Ed up to £85,000 and all steps are taken to secure customers funds by Dearing to UK law just as you expect from any compliant regulated financial services company in the UK they’re authorized and regulated by the financial conduct Authority so why not give them a try and save yourself hundreds in investment fees that the old platforms still charge so interest rates interestingly we’re seeing the bank rate slow down now but sadly saving rates haven’t really caught up there’s a few fintech providers out there giving 4% but most major Banks aren’t in fact I have some dormant accounts with Halifax and I couldn’t believe the letter I got through the door saying that they were offering 1.5% interest on my empty savings account promoting it like it was something to be proud of even if you’re saving for a deposit right now definitely check out the finex or a stocks and shares Isa the FCA have pulled in Bank CEOs and to grill them on the poor saving rates they’re passing on to Consumers so let’s look at the forecast of the bank rate because that is what is causing a lot of the pain for mortgages right now here from the bank of England their current predict ition is that where we are right now at about 5.25% is about right and we might stay here for a while however it looks like they’re adding belt embracers just in case inflation continues to increase but we might see the bank of England rate go to 5.5% or even higher if inflation stays above 2% the main message here is that we’re at the top of of course the bank of England can only forecast and not predict the actual future neither can I before you jump in the comments but it means that all eyes really are an inflation the bank of England are stuck between a rock and a hard place at the moment keep interest rates high or Worse increase them at the same time if they act to slowly like they did with raising them the UK will risk dipping into recession and I can assure you the decision they make over the next few months will probably be wrong as usual and cause the worst case scenario it’ll happen we all know it it’s happened before it’ll happen again but seriously the monetary policy committee will likely be debating whether to increase the bank rate to 5 a half% or keep it at 5.25% for the next few sessions they have in the calendar but this is the wrong debate the monetary policy committee should instead be voting on whether or not to lower interest rates to 5% or keep them at the current rate the right course of action would be to lower rates surely given the inflation is still way above the bank’s Target of 2% it might seem odd to call for a cut to interest rates and it will certainly be a difficult call to explain to the public and the treasury but it could be the right one this is because although inflation is above Target Target it is actually much lower than where the bank had expected it to be at this point in their previous forecast if you look back in history what is more the producer price inflation has fallen and the Euro Zone annual rates have turned negative which should mean lower costs continue to be passed on to consumers in the UK If the bank of England overcook this a recession will mean hardship and misery for millions of people across the country as they find themselves losing their jobs and maybe even their homes living standards will Decline and the country will experience yet another lost decade with young people and the poor being most adversely affected and still you have to remember even if inflation is negative or there’s a recession prices are still super high and things in general are 20 to 30% more expensive now let’s talk about Rishi it’s dangerous of rishy to be celebrating that inflation is going down or celebrating that he has somehow personally hared inflation what he’s actually saying is that the growth of price increases have slowed but the reality is it’s still increasing I find find it a little bit uncomfortable to celebrate harving inflation yes it’s a good thing but in the past 3 years alone we’re looking at on paper almost 30% increases in prices if not more in real terms inflation is a little limited versus what we actually see the prices for some items and services have definitely more than doubled from what I’ve seen and inflation doesn’t factor in everything in the economy it’s a little bit of a flaw the bank of England expects inflation to decline down to 2% by about 2025 so far it looks like we’ve seen the worst of inflation and it will continue on a downward Trend but again I can’t stress enough inflation going downwards doesn’t mean prices are going down it means they’re increasing more slowly and it’s good to see that the bank of England are calling out that inflation is falling but overall even now at 4.6% at the time of filming it’s still too high and with a lot of inflation at the moment coming from goods and services what we’re likely seeing here is an increase in the cost of living and these small service-based businesses increased their prices to help afford the salary increase increases which have been as high as 7% in the private sector and overall the bank of England the keeping rates at 5.25% while inflation remains above average but they are at risk when the time is right to begin reducing it and taking pressure off the mortgage Market as a whole speaking the mortgage Market what’s happening to mortgage rates right now of course the slowdown in the property Market is due to a few factors mainly that after any super hot market like we’ve just had that has to be a peak and it has to call off at some point but also with interest rates higher everyone’s affordability is lower and people are beginning to wait out for the dip you can see the huge Spike here in 2022 peaking at around 5.8% on average for a 2-year fix before things started to come down ever so slightly to around 5% on average and of course some are a bit higher some are a bit lower depending on your loan to value the financial times reported that as expected UK mortgage approvals have fallen more than expected looking at the post-pandemic boom that happened we hit above normal levels through 2022 before it dropped in 2023 substantially we went from around 110,000 mortgage approvals down to about 50,000 that’s almost half of the demand that we were seeing months ago there’s also a huge reflection on the market right now sellers are still in denial about the dropping prices estate agents are trying to hang on to the good times so we’re still seeing asking prices well above where they should be which means big discounts are quite common on the market right now as asking prices start to come down to meet the reality of offers and affordability of buyers Nationwide is sharing a similar story we’re still at about minus 5.3% year on-ear which just isn’t enough when we were at 8 to 12% growth for over two years overall the market is still massively up and looking at this graph from the Halifax house price index to bring it to life a little bit more you can see this huge decline from September 2022 up to September 2023 where we went from 10% annual year-on-year growth all the way down to 5.3% but when you look at the house prices in general to put all of this in context just looking at 2020 to the current day the crash that we’re meant to have isn’t really anything huge we haven’t seen the post-pandemic surge peaking mid 2022 with the market taking a dip at the end of 22 when rat surged but even throughout 2023 with higher rates it sort of flatlined a little bit before taking another dip and a slight recovery to be fair the market is fighting hard to stay up but for the average price to shoot up from 240k up to 280k in just 3 years is a lot so it would be nice to see a new Norm somewhere in the middle with an average around 260k overall the buyers Market continues it has been a sellers market for ages and sadly when we found this house it was in the midst of that sellers Market but I think when it’s a buyer’s market and things are harder it means that estate agents actually have to work for their money and know things about houses I don’t know if anyone else experienced this but we went to loads and house viewings and EST stage agents knew absolutely nothing about the house that they were actually selling they’d List It Rock up for 30 viewings in a day and sell it for 20% over the asking price with zero skill and it’ll be nice to see some estate agents with some skill for a change work harder to learn a little bit about the house they actually selling this graph from zuper as part of the house track monthly report shows the discounts on average we had zero discounts throughout the 2022 boom but now discounts are around 4% meaning there’s a misalignment between the sellers asking prices and what buyers are willing to pay since the 2022 budget which I’m sure is the one that Liz trust crash the economy we’ve been about 28% lower after all of the rate Rises where could house prices go in the latest Jeremy Hunt budget the obr provided some interesting forecasts according to the obr residential property prices are expected to increase by 0.9% in 2023 but then face a significant downturn decreasing 4.7% in 2024 meaning the headlines will be scary next year as a result of this but remember context is key when thinking about the 2020 to 2023 graph that just showed this decline is anticipated to bring the price of the average UK home to a low of approximately £ 266,000 in Q4 2024 now the obr’s forecast outlines an overall decrease in nominal house prices by 7.6% from their peak in the fourth quarter of 2022 to their lowest point in the final quarter of 2024 and the OB says again sounds scary but context is King the fall is 2% less than the OB previously anticipated ated in March 2023 so they’re softening the anticipated crash there’s two main factors impacting property prices and mortgage rate pain with a new average looking to be about 4 and a half to 5% for the next few years ahead people simply cannot afford the same amount on houses that they could offer when stretching their finances on sub 2% fixed rate mortgages this means that everyone’s knocked down a peg or two on the ladder and this creates a little bit of a problem with expectation versus reality where the people who don’t want to downgrade their expectations on a Dreamhouse and instead instead get something smaller or in a worse area that they can actually afford it’s a hard pill to swallow as a result we’re already seeing falling transactions in the market which means houses are taking longer to sell sellers desperate to sell are willing to offer bigger so-called discounts on their overpriced asking prices and what all of this looks like on the OB graph is that we’ll see a dip in 2024 before then the market recovers and finds some kind of new Norm as we go towards 2027 what does this all mean well it means that according to the obr to the end of 2024 is a good time to buy a house as it’s hitting the bottom before prices begin to increase and stabilize once again my advice is that you shouldn’t be waiting it out to time the market or find the bottom or the dip if you’re buying a house for the long term then as long as you don’t pay over the odds for it or stretch your finances then go for it if you find a great house that you love then just go for it put in an offer if you enjoyed this video then check out my renovation playlist here where I’ll show you all of the renovations going on in this house at the moment which is a lovely 1950s build so click on the video here in the playlist and I’ll see you in the next video