Sell up or stay put — what next for the housing market?

Buyers are rushing to exchange contracts as soon as possible to beat the stamp duty rise in April.
Many transactions were put on hold until the budget on October 30 in the hope of some property-friendly policies.
But in fact there was an immediate rise from 3 to 5 per cent in the stamp duty surcharge on additional properties and an end to the stamp duty holiday that was brought in to stimulate the market. This will mean that from April 1 buyers will pay duty on a property’s value above £125,000, instead of £250,000, while the threshold for first-time buyers will go from £425,000 to £300,000.
Meanwhile, higher levels of government borrowing and employer national insurance have stoked fears of higher inflation and interest rates. Mortgage rates are already on the rise.
So, is it a good time to buy? Here’s what you need to know.
The average UK house price fell 0.3 per cent to £291,828 from August to September, although it was still up 2.9 per cent over the year. Prices have risen 28 per cent since the average of £228,314 in January 2019.
The estate agency Knight Frank thinks that prices will go up 2.5 per cent next year instead of the 3 per cent it forecast in August, because of higher borrowing costs. Hamptons, another estate agent, cut its forecast for house price growth over the next five years from 20.5 to 19.3 per cent, and thinks prices will rise 3 per cent next year.
While the Bank of England cut its base rate from 5 per cent to 4.75 per cent this month, more cuts are now less likely because inflation for the year to October went back above the government’s target of 2 per cent. The consumer prices index inflation measure of 2.3 per cent was up from 1.7 per cent in September, after a rise in energy costs.
Alastair Cochrane from the estate agency Stirling Ackroyd said the number of agreed deals this month was 25 per cent higher than last year. “We saw quite a strong bounceback — people said the budget wasn’t as bad as they had expected. Now that the US election and Bank of England rate decision are out of the way, activity has been better than usual.”
Agents also say that more houses are coming on to the market as sellers look to get in before the stamp duty increase.
Andrew Montlake from the mortgage broker Coreco said it could be a good time to buy, even if mortgage rates come down next year: “Waiting a few months might save 0.25 percentage points off your rate, but there could be competition and house prices might have gone up, so you would need to borrow more.”
The average sale takes 123 days from accepted offer to completion, according to the property data firm Landmark Information Group. March 31 is 127 days away.
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Mortgage deals below 4 per cent have largely disappeared because of the expectation that interest rates will not come down this year, and maybe not for some time. The average two-year fixed rate is up from 5.39 per cent on November 1 to 5.54 per cent, adding £216 a year to repayments on a 25-year £200,000 loan.
The increase in inflation means that the Bank of England’s monetary policy committee is unlikely to cut its base rate from 4.75 per cent when it meets next month. It was cut by 0.25 percentage points in August and November after more than two years of steady increases that took it from 0.1 per cent in December 2021 to 5.25 per cent in August 2023.
But banks often offer mortgage deals in January and February to try to meet sales targets — Peter Stimson from the lender MPowered Mortgages said there could be “intense competition” in 2025.
Mortgage offers usually last six months but you can agree a rate and then switch to another deal if a better price comes along.
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Moneybox Mortgages, a broker that focuses on first-time buyers, said there had been 8 per cent more applications for loans in principle in the past three weeks than in the three weeks before the budget.
Felicity Holloway from Moneybox said: “Those who are ready, or almost ready, to buy their first home but were waiting for mortgage rates to come down are now keen to start their search and get ahead of the stamp duty changes.”
That deadline has convinced Rhys Crookes to get a move on. Crookes and Maddie Green, both 23, want a three-bedroom house, which can cost about £400,000 in their Hampshire village of Marchwood. Beating the April deadline would save them £5,000 in stamp duty.
“We weren’t in a massive rush before, but this has kickstarted us to move quicker, otherwise we are looking at quite a substantial bill,” said Crookes, who works at an oil refinery. “Paying £5,000 is not crazy money, but it takes away from your deposit or the amount you have to buy things for the house, like furniture.”
First-time buyers may, however, face less competition from landlords, thanks to the additional homes surcharge. Amy Reynolds from the estate agent Antony Roberts said one investor interested in a one-bedroom flat in East Sheen, southwest London, pulled out when the surcharge increased. The flat was snapped up by a first-time buyer couple for £390,000
Things are quieter further up the ladder, because those needing larger mortgages to upsize have been put off by higher borrowing costs.
Some 202,520 new mortgages were agreed for home movers from January to October, the trade association UK Finance said, compared with 368,160 over the same period in 2021, when rates were much lower.
Cochrane said: “If rates come down, people might start to move, but it’s harder to stomach when rates are 4.5 to 5 per cent.” He said that bigger homes could come on to the market in the new year, perhaps after those looking to downsize “have one last Christmas where they are”.
The estate agency Savills estimated that the number of movers will rise slowly from 280,000 next year to 350,000 by 2027, as mortgage rates eventually fall.
There have been no signs of a drastic sell-off among buy-to-let owners yet, but it may be coming. They have been gradually leaving the market as the effects of higher mortgage rates and less generous tax reliefs kick in. The number of buy-to-let loans fell from a peak of 2.06 million in November 2022 to 1.95 million in September, UK Finance said.
About 32 per cent of homes on the market are chain-free, according to the property website Zoopla. These are often properties that had previously been rented out.
Reynolds said she spoke to one landlord with a one-bedroom flat in southwest London worth about £350,000 who plans to serve notice to her tenant in January in the hope of selling it before March 31.
Other landlords may be planning to sell when the Renters (Reform) Bill becomes law. It is making its way through parliament and could abolish landlords’ right to no-fault evictions.
“It could be the catalyst as to whether landlords will choose to leave the market in bigger numbers,” Cochrane said.
Rebecca Booker and Simon Read plan to sell off their two rental properties over the next year because renting property “is just not financially viable” anymore.
The couple, from Leighton Buzzard in Bedfordshire, own two properties in Ramsgate, Kent. Booker bought the first one, a two-bedroom terraced house, for £128,000 in 2013 with some money she inherited, and the couple then bought another for £160,000 in 2015.
They want to sell the first property before their existing five-year fixed mortgage deal ends in March. They pay £250 a month now, but the last time they looked at mortgage rates even the cheapest deals would treble their repayments. While they earn £900 in rent a month, they also have to pay letting agent fees, insurance and maintenance cost and fear their profit being wiped out entirely.
“All we need is another big maintenance bill and it will cost us more than we will make,” Booker said. “You can’t just keep raising prices like other businesses because your tenants can’t afford it.”
She hopes to sell to first-time buyers because “it would be nice to help someone get their first step onto the ladder.” The couple plan to put their other rental property on the market after that has sold.
Booker said: “We would be happy to still let property if it was financially viable, but it’s just not.”