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Is now the perfect time to trade up?

Date Published 06 July 2018

With negative news stories surrounding interest rates, house prices and Brexit, a lot of people are shying away from the housing market. However, it could be the perfect time to trade up and I will explore why in this feature:

1) Mortgage interest rates are still ridiculously competitive. If you are nervous about rate rises, a 10-year fix starts from just 2.49%*.

2) Average wage inflation. Companies expect to increase pay by 3.1% in 2018** and there is news of pay increases within the public sector. This makes housing more affordable, especially if your wages are rising faster than a 10 year fix mortgage rate!

3) Housing market cycle. I've previously blogged about this and Fred Harrison, in 2005, predicted the 2007/08 crash using his analysis of the housing market which showed an 18 year cycle, back tested for 300 years. In short, 7 years up, mid term wobble, 7 years accelerated growth and 4 years of crashing prices. The last crash ended in 2010/11 so, using his model, we are in the mid term wobble and can expect significantly rising prices soon.

As confidence and prices are having a mini wobble (Halifax data showed a 3.1% drop in April alone) it allows sellers to pick up more expensive property on better terms. For example, a 3% drop on a £500,000 home is £15,000 but on a £250,000 home is £7,500.

A buyer looking to upgrade in this scenario has just saved themselves £7,500 and can lock in a very good mortgage rate that is less than average wage growth, thus costing less (in real terms) each year! This is why I believe that it could be a very opportune time to upgrade your home before we see rising prices again.

Paul Davies BSc (Hons), Cert SMP, Cert Cii

Mortgage Advisor and Director, @Home Estate and Letting Agents, 01403 886288

*Correct a time of going to press
**Bank of England research