Should you buy a home during the UK cost of living crisis? Real estate experts explain

Property prices continue to rise and with the cost of living crisis taking a toll on the wallet, you may be wondering if now is the right time to buy.

The average UK house price in February was £27,000 higher than a year earlier – up 10.9% – to a record £277,000.

That’s according to data from the Office for National Statistics (ONS), which says prices are up 10.9% compared to the same month last year

House prices in England rose 10.7% in February to an average of £296,000, while Wales reported a 14.2% rise to £205,000.

The cost of an average home rose 11.7% to £181,000 in Scotland and 7.9% to £159,000 in Northern Ireland.

Should you buy a property this year?

Real estate prices have increased this year


Tim Graham/Getty Images)

Of course, no one knows for sure if home prices will hold up or rise this year, or if they could fall.

The property market skyrocketed in 2021 as buyers rushed to take advantage of a temporary stamp duty reduction.

The coronavirus pandemic has also changed usual market behavior, making it harder to predict what might happen this year.

Experts assume that the increase in real estate prices will slow down. Zoopla expects prices to rise 3% this year, while Halifax estimates prices could change 0% to 2%.

The bad news for homebuyers is that no expert expects prices to drop in the short-term – meaning getting up the apartment ladder is likely to only get more expensive.

Are you planning to buy a property this year? Let us know in the comments below.

Adjustable rate mortgages are also on the rise after the Bank of England raised its benchmark interest rate to 0.75%.

But on the other hand, there are more low deposit offers. This is especially helpful for first-time buyers who don’t have a lot of money saved.

However, remember that the lower your deposit, the more money you will have to borrow and pay back.

Ultimately, a mortgage is a big decision that goes far beyond the cost-of-living crisis. Therefore, always consider your long-term financial situation when deciding to make a purchase.

The outlook for property prices is only relevant for the near future and is subject to change, so no one can be sure how the market will react over the next few years.

“If you have the money and you have plenty of room in your budget for rising mortgage costs, then it doesn’t make much of a difference what happens to house prices in the future as long as you’re in the long-term short-term,” said Sarah Coles, a personal finance expert at Hargreaves Lansdown.

“However, if you’re stretching your finances to the breaking point in a panic about rising prices, this is a good time to review your options.”

If you’re really unsure, consider speaking to an independent advisor before entering into a long-term arrangement, said Rachel Springall, personal finance expert at MoneyFacts.

They should be able to help you go through your finances and figure out what you can afford.

“Budgeting is critical to making sure you’re getting the most bang for your buck, as is building a decent deposit with your free cash,” Ms Springall said.

“Borrowers would also be wise to buy with their heads, not their hearts, as some properties may be well above an acceptable asking price due to demand.

“As house prices rise, borrowers may need to keep increasing their deposits, and as inflation rises, confidence in buying a property takes a nosedive.”

“There are ways to make the dream of owning your own home a reality,” she added.

The secrets to get on the apartment ladder

Help for first-time buyers

If you’re struggling to buy your first home, there are many first-time buyer programs to help you.

We explain some of the schemes now available:

A lifetime ISA account (LISA) gives savers a free 25 percent increase in money from the government to use towards their first home or their retirement.

You can only save up to £4,000 each year in a LISA, meaning the maximum bonus you can collect is £1,000.

The bonus is paid out monthly and your money also earns interest – however, you only get a bonus on your contributions, but no interest.

The maximum bonus is £33,000 if you open at 18 and max it out by the time you are 50 – you cannot deposit into a LISA over the age of 50.

Anyone between the ages of 18 and 39 can open a lifetime ISA for free.

But if there are two of you saving for a house together, you could both open a LISA account – meaning you could potentially get £2,000 free every year.

You’ll pay a penalty and lose your bonus if you withdraw money from your LISA account for anything other than your first home or retirement.

Buying a property this year is still possible


(Getty Images)

This allows savers to buy a home with a 5% down payment and the government will lend you up to 20% of the property price, or 40% in London.

After five years, you’ll have to start paying interest at 1.75% on the loan, so keep those additional costs in mind on your repayments.

Buyer’s help is only available for newly built property and there are maximum property values ​​set for different parts of the UK.

For example, the maximum property price to buy in the North East of England is £186,100, rising to £600,000 if you buy in London.

Help to Buy will run until March 2023 unless the government extends it.

Help buying ISA accounts that closed to new savers on November 30, 2019 – but if you’ve already opened an account you can continue saving until November 30, 2029.

You must also claim your bonus by December 1st, 2030.

When they first launched you could open an account with a maximum of £1,200, but after that you can only save £200 a month on it.

The Government then tops your savings with a 25% bonus – the maximum you can get for free is £3,000 and you need to save £12,000 to get this.

This initiative allows savers to pay a 5% deposit and the government acts as guarantor if they miss a payment.

But while the program is marketed to first-time buyers, it’s not just limited to those hoping to climb the ladder for the first time.

Guarantee mortgages are available to anyone buying a property up to £600,000, unless investing in rental or second homes.

Critics of the program point out that if you can afford a higher mortgage, you’ll save money in the long run.

Some lenders also offer 5% mortgages outside of the government-backed program, which may be cheaper for borrowers.

Here you buy a share of a property – between 25% and 75% of the property’s value – and pay rent for the rest.

The percentage you can buy is usually between 25% and 75%, but can be as low as 10% for some houses.

You can buy additional amounts under what is known as “staircasing” where you slowly increase the amount of your property.

Joint ownership is not restricted to first-time buyers, but to be eligible you must have an individual income of no more than £80,000 per year or £90,000 per year in London.

Your combined income cannot exceed these limits when shopping as a couple.

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