Getting on the housing ladder can be a challenge at the best of times. Saving enough for a deposit, finding the home you want to buy that matches your budget, plus the cost of  solicitor’s and surveyor’s fees are just a few of the things you need to consider.

With house prices currently falling, caused by cost of living rises, the question a lot of people are asking, ‘is now a good time to buy a house’?

According to property website Zoopla, the number of new property sales agreed has fallen by 28% over the past year, with demand for homes plummeting 44% in the same period.

This is likely due to the rise in mortgage interest rates. On 15 December 2022, the Bank of England raised the base rate to 3.5%, which saw an increase in mortgage payments, and it’s expected to increase again this year.

For someone taking out a two-year fixed-rate mortgage with a 10% deposit, average interest rates are around 6%. On a £200,000 mortgage this means that monthly repayments would be £1,290.

That’s significantly higher than November 2021, when you would be paying closer to £900 a month. According to bank Nationwide, a 10% deposit is now more than 50% of a typical first-time buyer’s income.

Do you have a large deposit?

Mortgage payments are most affordable for those with a large deposit. As first-time buyers tend to have smaller downpayments, if you’ve only put down a small deposit and house prices fall, you could end up in negative equity (negative equity is when the value of your home is worth less than the amount you have still to pay on your mortgage).

This will only be an issue if you wanted to sell your home while you’re in negative equity, rather than waiting until house prices rise again.

With house prices falling it may seem like the ideal time to grab a bargain, but you need to factor in mortgage costs and rising energy bills, which may cancel out any savings.

The rise in the cost of living is making goods and services more expensive compared with a year ago, which could make it difficult to keep up with your mortgage repayments.

House prices are predicted to continue falling over the next two years, so anyone who buys a home now needs to be prepared to see the value drop.

Whether it’s a good idea to buy really depends on your personal circumstances. Can you raise a larger deposit? Can you keep up with repayments if interest rates rise?

To work out how much you can afford to borrow when buying a home, use our Mortgage affordability calculator 

Buying your first home?

If you’re confident you will be able to keep up the mortgage repayments, buying now might make sense. This is especially the case if you plan to live in that property for some time, rather than treating it as an investment.

If it is an investment property, you’ll need to be prepared for the value of your home to potentially decrease and for it to take some time before it improves.

If house prices continue to fall, by holding off you may not need such a big mortgage loan and the minimum deposit by the lender required may be smaller too. If you have the option to live with family, you may be able to delay and save a larger deposit.

Saving up as big a deposit as you can will increase your mortgage options and help you to get the best mortgage deals. To get access to a wide range of mortgages speak to a mortgage adviser. They can search the market on your behalf and recommend the best deal. When buying your home, find out how much you’ll pay each month with our Mortgage calculator. 

If you’re buying a residential property or piece of land in England or Northern Ireland, you’ll have to pay Stamp Duty Land Tax (SDLT) if your purchase is over the threshold of £250,000. To work out how much you’ll pay on your new property or land, use our Stamp Duty calculator.

If you buy a residential property or land in Scotland, you’ll need to pay a tax. Find out how much by using our Land and Buildings Transaction Tax (LBTT) calculator. If you buy property or land in Wales over a certain price, you’ll need to pay a tax. Find out how much by using our Land Transaction Tax (LTT) calculator.