Why Waiting for Lower Mortgage Rates Could Cost Homebuyers More
Homebuyers hoping for mortgage rates to drop further before making their move are being warned that this strategy might end up costing them more in the long run.
While mortgage rates have already started to fall, with predictions that the Bank of England might lower interest rates again this year, some buyers are holding out, hoping for even better deals. However, new research from mortgage advisor Alexander Hall suggests this approach could leave property buyers with thousands of pounds in extra costs by the end of the year.
The culprit? Rising house prices and stamp duty changes.
Stamp Duty Shock Ahead
With house prices expected to rise this year and stamp duty thresholds set to increase on April 1st, buyers may find themselves paying a lot more in taxes than they bargained for. According to Alexander Hall, the cost of stamp duty on the average UK home, priced at £268,087, will increase by £2,500—from £904 to around £3,404—once the new thresholds come into play.
For anyone not already well along in the home-buying process, the clock is ticking to lock in the current stamp duty rates before the deadline. The temptation might be to wait for mortgage rates to drop further, to offset the stamp duty increase. Fortunately, mortgage rates are predicted to fall from an average of 4.27% to 3.63% by the end of the year. That could mean a monthly mortgage saving of £37, or £900 over a two-year fixed-term loan.
The Price of Waiting
However, waiting might not be the money-saver it seems. Home prices are expected to climb by 3.5% this year, pushing the average property price up to £277,470, compared to £268,087 today. This increase could make your down payment significantly higher, swallowing up any savings you’d gain from lower mortgage rates.
In fact, Alexander Hall’s analysis shows that by waiting until the end of the year, homebuyers would likely pay £1,877 more in mortgage deposit costs due to rising house prices. And with stamp duty set to increase by another £469, the total extra cost would be £2,346—more than double the £900 you’d save on mortgage payments.
Acting Now Could Save You More
Stephanie Daley, director of partnerships at Alexander Hall, emphasizes that if you’re not close to completing your purchase, you’ll likely miss the chance to secure the current stamp duty rates. After April 1st, the average buyer in England will face an additional £2,500 in stamp duty costs.
While it’s tempting to wait for mortgage rates to drop further, Daley warns that doing so could cost you more in the end. With house prices expected to rise and the housing market predicted to be stronger in 2025, waiting might only increase the overall cost of buying a home.
The good news is that many lenders are already lowering their rates, reflecting a positive shift in the market. By acting now, buyers can lock in a better rate and avoid future price increases, saving more in the long run. So, while it may feel like a good idea to wait, the smart move is to act now before the cost of waiting adds up.
