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As interest rates continue to rise – up a further 0.75% to 3% only last week in fact – and we have seen the first monthly fall in house prices since July 2021, many current and would-be homeowners are facing the same quandary. Do I move house now, or hold fire in the hopes of a cheaper mortgage and a better selling price for my own home?

Even homeowners on a fixed rate mortgage have not been immune to the rising costs of living, thanks to the very unwelcome 2% increase to average fixed rates after the ill-fated mini budget in September 2022.

With predictions of a 10% fall in house prices between 2022 and 2024, we are also seeing more properties advertised on the likes of Rightmove and Zoopla being reduced. Market activity has slowed steadily since October as the increased cost of living catches up with us. It would therefore seem that the house price bubble which saw buyers scrambling to secure a popular property at any cost appears to be over, and sellers no longer have carte blanche when it comes to asking prices. 

So, whether affordability is becoming an issue, or you have outgrown your current home, is now the best time to move, or should you wait? 

Much like any financial decision we make, there are no hard and fast rules when it comes to deciding if you should move house now. It all depends on your own personal circumstances. 

However, there are a few things to consider if a house move is on the cards.

stacks of coins next to small wooden house

Can you gain from falling house prices?

It would be a mistake to think that falling house prices will allow you to bag an easy bargain. After all, the value of the property you plan to buy may have reduced, but so will the value of your existing property.

If your purchase is dependent on the price you can get for your own home, affordability will still be an issue. In addition, mortgage lenders have already become more stringent with their affordability criteria in 2022, as is always the case when a recession looms. 

If you have a particularly sought after property for which demand will always be strong, and there is unlikely to be a big shift in its value, now could be the time to make the move and save some money on your next property. This is especially true if you are downsizing and won’t need a mortgage for your next home. However, you still need to weigh up the costs of moving and, if you are upsizing, the impact of a new mortgage if you are already on favourable rates.

Before you consider putting your home on the market, make sure you research current asking prices for the type of home you want to buy, and homes which are similar to your own, and seek reputable in-person or online valuations. You should also discuss mortgage options with a broker and/or your existing lender.

hand holding house keys

What if you are not dependent on selling a property?

Even if you don’t have an existing property to sell, you still need to consider your financial security when it comes to buying a home.

Rising mortgage costs mean that buy-to-let margins are tighter than ever. With a 20-40% mortgage requirement for second homes, you will need to be certain that you can afford the outlay even if your circumstances change – as they so often do in a recession – quite apart from any further rises to interest and inflation.

When it comes to first time buyers, even without a property to sell you still need to consider the financial impact of moving – such as estate agent and legal fees and the hefty lump sum you need for your deposit – versus your monthly expenditure for rent. 

In some parts of the UK, rental fees have risen a staggering 20% over the last year. This is unlikely to change in the near future, as landlords try to recoup rising mortgage rates and there remains a shortage of rental properties on the market. Whilst high rental fees can make saving difficult, if you have managed to scrape together enough for a deposit, do consider all the options for buying a home sooner rather than later, including shared ownership. Paying off your own mortgage is always going to be better than paying off your landlord’s. Many first time buyers are also exempt from stamp duty now too, since the rate at which you pay no tax has been raised to £425,000. 

A word of caution when it comes to high loan to value mortgages though. Whilst some mortgage lenders are still willing to offer mortgages of 90% plus and the mortgage guarantee scheme is in place until 31 December 2022, there is always the danger of negative equity when house prices fall. This means that you are repaying more for your mortgage loan than the house is actually worth. To avoid this happening, the bigger the deposit you can put towards a new home the better. You will also get a more favourable interest rate with a lower loan to value mortgage.

mortgage letter tiles

Are there any positives to rising interest rates?

If you have existing savings which have benefited from higher interest rates this year, and are in a position to purchase a home which you see as a long-term investment that will ride out any house price crashes, then now may be exactly the right time to buy. Equally, by holding off and saving even more towards your deposit while interest rates continue to rise, you might find yourself in a better position to offset those high mortgage rates in 6-12 months’ time and take advantage of lower house prices. 

Rising interest rates may make the idea of a longer term fixed rated mortgage seem appealing. But the Bank of England anticipates that rates of inflation and interest will hit their peak in 2023 and return to their preferred rate of 2% or below by 2026. As such, locking yourself into a fixed rate mortgage for five years plus today may not be advantageous.

home for sale sign

What will happen to the housing market in the longer term?

It seems inevitable that the unprecedented house price growth we have seen over the past few years is over. However, there is light at the end of the tunnel for anyone who bought during the house price peak, and no reason to delay a move for those who can afford to purchase now. We are unlikely to see the rapid rise we saw between 2020–2022 again, however Savills estate agents and other property insiders have predicted a return to house price growth from 2024 onwards, with an average increase of 18% by 2027.

So, whilst you may not see any quick wins when it comes to making money on a property purchase, deciding to move house now and buy a home you can afford which can grow with you as a forever home – or at least offer what you need in the medium term – is still a sensible investment. 


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