UK Housing Market Trends: Why Waiting to Buy Could Cost You More

The UK property market in 2024 has been marked by rising house prices, elevated rent costs, and a competitive mortgage landscape.

According to the Halifax House Price Index, house prices in the UK rose by 4.7% year-on-year as of September 2024. Meanwhile, rents in the private sector have increased by 8.4% across the UK, with an even sharper 9.6% increase in London.

For first-time buyers, these escalating costs mean that waiting to buy a property could become a financially challenging decision.

This blog breaks down the trends impacting first-time buyers in the current housing market, analysing why purchasing sooner rather than later might be the best option despite high mortgage rates.

Rising UK House Prices: What It Means for First-Time Buyers

For first-time buyers, increasing property prices present a major financial hurdle. With house prices rising by 4.7% year-on-year, the cost of purchasing a home has risen substantially, meaning potential buyers may face higher purchase prices the longer they wait.

In an environment where inflation is affecting almost every market, housing remains an attractive asset, with demand keeping prices buoyant across the UK.

Key Drivers Behind the UK House Price Increase

The consistent increase in property prices in the UK is driven by several factors, including:

1. Demand Outstripping Supply

With a high demand for housing and insufficient new builds to meet this need, prices continue to rise, even as mortgage rates fluctuate.

2. Low Unemployment and Wage Growth

In recent years, the UK has experienced a tight labour market with wage increases, enabling more people to save and buy homes despite rising interest rates.

3. Market Stabilisation Post-Pandemic

After an initial period of uncertainty, the housing market has stabilised, and consumer confidence has returned, driving prices back up.

For prospective buyers, waiting for prices to drop may not be a viable option, as these underlying market conditions show no sign of immediate change.

Increasing Rent Prices Across the UK: A Growing Concern

Alongside rising house prices, rent costs have surged by 8.4% in the UK year-on-year, with London facing a notable 9.6% hike. This puts added financial pressure on individuals and families who are trying to save for a home.

For those looking to enter the property market, increased rental costs make it harder to save for a deposit, which can be a significant financial barrier to entry.

Given that monthly rent payments do not contribute to ownership or asset growth, potential homeowners find themselves caught in a loop where saving for a property becomes increasingly difficult.

Factors Driving Up Rental Prices

Several key factors have contributed to the significant rise in rent prices, including:

1. High Demand in Major Cities

Cities like London, Manchester, and Birmingham continue to attract a high number of renters, and limited rental supply has led to fierce competition.

2. Increased Living Costs

Inflation has affected everyday expenses, including utilities and maintenance costs, leading landlords to pass on these expenses to tenants.

3. Decline in Private Landlords

With new regulations and increased taxes, some landlords have left the rental market, reducing available rental stock and driving prices up.

This increase in rental costs presents a double-edged sword: while buyers aim to save for a deposit, rising rent costs make it harder to allocate funds for a future home purchase. For many, this means exploring mortgages sooner rather than later may be a more affordable option.

The Mortgage Landscape in 2025: Is It Time to Buy

Mortgage rates in the UK have seen significant changes over the past two years, reflecting the broader economic landscape. Rising interest rates have made borrowing more expensive, but the mortgage market is competitive, and there are still favourable options for many buyers.

1. Fixed-Rate Mortgages

Fixed-rate mortgages, which lock in interest rates for a set period, remain a popular choice. While rates are higher than they were pre-2022, they are still manageable for those with good credit.

2. Variable-Rate Mortgages

These rates can fluctuate with the market, which could be beneficial if rates decrease. However, this option does carry risk as rates could increase.

Despite higher rates, potential buyers may find that purchasing now is financially wiser than continuing to wait. With rent prices rising faster than mortgage interest rates, buyers who secure a mortgage might find that their monthly payments are on par with or even lower than what they currently pay in rent.

Additionally, while mortgage payments build equity, rental payments do not, making home ownership a more beneficial option in the long term.

The Financial Impact of Waiting to Buy

For first-time buyers, the decision to wait can have a tangible financial impact due to the steady increase in house prices and rents. Postponing a home purchase by even a year could mean a higher purchase price and a more substantial deposit requirement, especially as rents and living costs also continue to rise.

Cost Comparison: Buying Now vs. Waiting

Postponing a home purchase by even a year could mean a higher purchase price and a more substantial deposit requirement, especially as rents and living costs also continue to rise.

• House Price: Buying now secures the current market rate, while waiting could mean facing a 4.7% or greater increase in property costs.
• Monthly Rent: Purchasing now avoids ongoing rent expenses, whereas waiting means dealing with an 8.4% or higher increase in rent.
• Deposit: Acting sooner locks in the current deposit requirement; waiting may lead to needing a higher deposit.
• Mortgage Rate: Buying now allows for today’s mortgage rate, which can be locked in, while waiting carries the risk of potential rate increases.
• Equity: Buying now begins immediate equity building, while waiting maintains the status quo with no equity gains.

Practical Steps for First-Time Buyers in the Current Market

For those who are ready to enter the market, the following steps can help you make an informed and financially sound decision.

1. Evaluate Mortgage Options Early

With a competitive mortgage market, it’s crucial to research fixed and variable mortgage products to determine what best suits your budget and financial goals. Consulting with a mortgage advisor or broker can provide clarity and help you secure the best rate.

2. Prioritise Savings for a Deposit

With rising rents making it harder to save, consider automating your savings or adjusting your budget to prioritise deposit accumulation. Setting a clear savings target can provide focus and motivation to reach your deposit goal faster.

3. Explore Shared Ownership and First-Time Buyer Schemes

The UK government offers various programs designed to help first-time buyers get on the property ladder. Shared ownership and the Lifetime ISA are popular options that could make buying more affordable.

4. Consider Property in Less Expensive Areas

If your work allows for remote options or flexibility, consider buying property outside of major city centres. Many buyers have found affordable options in suburban or rural areas, often getting more property for their money.

Why Buying Now Could Be the Better Financial Decision

In a market characterised by rising house prices, surging rent costs, and competitive mortgage rates, waiting to buy a home can mean higher costs in the future.

First-time buyers today face a choice between entering the market now or facing potentially higher purchase and rental costs later. By evaluating mortgage options, focusing on savings, and considering alternative ownership schemes, prospective buyers can navigate the market and take advantage of current opportunities.

With housing costs steadily rising, making the leap into homeownership could offer long-term financial security and stability. By acting sooner rather than later, first-time buyers can start building equity and avoid the continual drain of rental costs, setting themselves up for a stronger financial future.