For a growing number of people, trying to buy a house seems like an unreachable dream. House prices have been spiralling out of control for the last 30 years, with average house prices rising from 4x the median household income in 1990 to 12x the median household income in the late 2010s and reaching almost 20x in London in 2021. However, despite the large challenges that seem to never end for the average person trying to buy a house, you don’t necessarily need to give up on the dream of home ownership. Generational wealth is very important for making sure your family is better set up for success than you are, and there are a couple of reasons for optimism, even in this fairly bleak market.

A Slowing Market

The market crash is coming. House prices have been rising fairly quickly for over a decade, ever since the last financial crash in 2008. There was a slight artificial blip around 2020 due to the pandemic and people moving out of bigger cities, but that didn’t lead to a bigger fall in prices. They bounced back fairly quickly. This time though, that doesn’t seem to be happening. There is a market correction underway and, although this may be bad for property owners, this may be the time for you to begin to attempt to buy a house. Especially with interest rates and the cost of living rising, you do not want to be beholden to a landlord who, whether or not they are benevolent, will feel the pinch of rising prices and understand the high demand for housing, and as a result will probably raise the prices on rent. With rent becoming increasingly unaffordable, and often the same as a mortgage would cost anyway, it makes little sense to pay for someone else’s mortgage if you are able to pass affordability tests and get a mortgage of your own. With prices falling, the affordability test may be easier to pass because the cost to income ratio is smaller. It is down to you to judge when you want to buy the house though. It is impossible to tell where the top or the bottom of the curve for market peaks or troughs are, so you will have to decide when you can afford the house and when it is no longer worth waiting, but it is definitely worth taking advantage of the dropping house prices if you possibly can.

The Threat of Interest Rates

While this isn’t as much of an uplifting factor as the first, it is a motivating factor, and a reminder that now might be the best time for you to try, rather than waiting. If you’ve found your perfect home, then consider jumping in, because the era of cheap money is gone. Due to many external factors like the rising price in energy due to the war in Ukraine, but also in large part due to Liz Truss’s Mini Budget and the economic fallout from that fiscal event, interest rates in the UK have skyrocketed in the past few months. This has had an impact on inflation, with it now being at around 11.1% and as a response to this, the Bank of England has raised interest rates, to try and control inflation.

Because of this, and the speed with which interest rates rose, mortgages are much more expensive now than they were in July or August. While the average mortgage was around 2-3%, you will now be lucky to get a mortgage that is under 5-6%, and people believe that this may rise in the coming year. There are also fewer products on the market because of the volatility in the market. And these trends don’t seem to be going away any time soon. It is possible that the number of mortgage products on the market could decrease again, and interest rates will probably rise again soon. This should factor into your decision for when to buy a house, because, although the cost of a mortgage is much higher than 3-6 months ago, this may be the cheapest we will see prices at for the next few years.

Housing remains one of the great challenges for this country on a macro level, as well as an increasingly difficult aim for individuals to achieve. While it now seems impossible for people under 40 to get onto the housing ladders, there are some rays of hope that are starting to shine through. If you’re financially able, take advantage of the situation that is developing in the UK housing market and get yourself your first home!