Would it be wise to purchase a home now?

Even though it's too late to avoid the stamp duty deadline, now might still be a good time to purchase real estate

Prior to the stamp duty thresholds dropping on April 1st, it is too late to purchase a home unless you are nearing the end of the conveyancing process. It might still be a good time to buy, though, as affordability pressures are lessening and interest rates are declining.

According to mortgage lender Nationwide, wages exceeded the growth of home prices last year, resulting in a "modest improvement" in buyers' affordability.

When interest rates continued to decline earlier this year, some sub-4 percent mortgage deals returned to the market, lowering borrowing costs for potential buyers even though mortgage rates are still much higher than their long-term average. The affordability constraints should be further loosened by additional rate reductions throughout the year.

After the stamp duty changes in April, it's also possible that house price growth will slow, which could make it a good time for those who are thinking about buying. The market is expected to remain fairly resilient overall, though.

Amanda Bryden, Halifax's head of mortgages, stated that "the persistent lack of available housing supply combined with persistent demand suggests property prices will continue to rise this year, albeit at a more measured pace compared to last year." For comparison, the bank reported that last year's house price growth was 3.3 percent.

How will the housing market be affected by changes in stamp duty?

According to Robert Gardner, chief economist at Nationwide, he anticipates a spike in transactions in March, which will be followed by "a corresponding period of weakness in the following months, as occurred in the wake of previous stamp duty changes."

The consequences of this may already be beginning to manifest. New buyer enquiries and newly-agreed sales turned "mildly negative" in February according to the latest sentiment survey from the Royal Institution of Chartered Surveyors (RICS), published on 11 March.

Following stamp duty changes, buyers may have more negotiating power when making an offer if there is a lull in buyer activity. You might even be able to deduct a few thousand pounds to help offset the increased tax liability.

There is still a sizable pool of homeowners looking to sell, which is good news for buyers. "For new listings, the latest net balance of +12 percent extends a run of positive readings for this series into an eighth successive month," according to the most recent RICS survey.

Net balance scores can be anywhere between -100 and +100 and are computed by deducting negative responses from positive responses. In this case, the majority of survey participants reported seeing more vendor instructions during the previous month, as indicated by the result of +12%.

It may be a buyers market, according to Colleen Babcock, a property specialist at Rightmove, who stated that sellers who are currently finding buyers are "working hard with their agents to price competitively and present their home in the best possible light."

In 2025, real estate firm Knight Frank predicts that house prices will rise by 2.5 percent overall, notwithstanding changes in stamp duty. Savills, an estate agent, is more optimistic, predicting 4% growth.

The affordability barrier still exists.

Despite a slight improvement in affordability last year, a Nationwide study revealed that the average first-time buyer was still paying five times their yearly salary, which is much more than the long-term average of three to nine times earnings.

According to the most recent data from the Office for National Statistics (ONS), the average home in England cost 7 points seven times earnings in 2024. This is an improvement over the 2023 figure of 8 points three times earnings, but it is still too expensive for many people.

Richard Cook, senior economics director at development consultancy Pegasus Group, stated that although housing affordability is starting to improve, the income-to-house-price ratio has gotten worse over the past ten years.

He continued by saying, "It is still nearly impossible to get a foot on the ladder because mortgage providers will only lend on four to five times one's salary."

In light of this, deciding when to move may have less to do with market timing and more to do with when you can afford to buy.

Do you think this is the right moment?

Prospective buyers will need to consider whether they can afford monthly repayments, especially in light of rising costs elsewhere, in addition to using their savings for a deposit or asking family for assistance.

Cost-of-living pressures are expected to increase once more this year, even though the worst of the inflation is over. Inflation is predicted to reach 3.75 percent in the third quarter. In April, there will also be a number of bill increases that will affect council tax, water and energy bills, and more.

Those who prioritize homeownership over all other considerations may suffer, according to Sarah Coles, head of personal finance at investment platform Hargreaves Lansdown.

According to her, "they may decide to scale back investments or pension contributions while they're saving for a deposit, or they may overlook the need for emergency savings." "Even once theyve bought, rising house prices and relatively high mortgage rates mean monthly payments can be high enough to put the brakes on their other financial plans.

Older Gen X homeowners who purchased when real estate was more reasonably priced had an average of 369 left over at the end of each month after all expenses were covered, according to the Hargreaves Lansdown savings and resilience barometer. Meanwhile, younger millennial and Gen Z homeowners had just 271. "The difference is stark, but they're both better off than renters," Coles stated.

In light of this, it is worthwhile to calculate how much you will likely spend each month after making a purchase. Take into account any prospective increases in bills and make plans for how you would handle a surprise situation such as redundancy.

Holding back is not necessary if you have estimated these expenses, have the funds, and are prepared to proceed. However, it is probably best to wait if you are unsure and believe that making the purchase now would maximize your monthly income and leave you with little money saved for emergencies. Consider waiting until mortgage rates are lower, negotiating a pay increase, or increasing your deposit.