Homebuyers warned not to wait for mortgage rates to drop before making their move

Research by award winning mortgage adviser, Alexander Hall, has revealed that homebuyers currently sat on the fence in hopes of improving mortgage affordability could find themselves thousands of pounds worse off come the end of the year, as forecasted house price growth and the resulting hike in both stamp duty and mortgage deposit costs would far outweigh the expected reduction to monthly mortgage payments.

The countdown is currently on for homebuyers across England, as come 1st April, the cost of stamp duty on the current average house price (£268,087) is set to climb by £2,500, from £904 to an average of £3,404, due to the Labour Government’s decision not to extend current relief thresholds.

Whilst this has created a momentary air or urgency for those currently progressing a sale through to completion, those currently sat on the fence may be tempted to sit tight a little while longer, in order to reduce the hit caused by a SDLT hike by taking advantage of improving mortgage affordability spurred by hopes of further interest rates cuts later in the year.

However, the analysis by Alexander Hall suggests that doing so could see them out of pocket to an even greater extent versus the increased cost of stamp duty that they would pay in the current market.

Mortgage rates forecast to fall

Mortgage rates are forecast to fall, reducing from the current average of 4.27% to 3.63% by the end of the year. As a result, the average homebuyer would see their monthly mortgage payment fall from £1,164 per month to £1,127 – a saving of £37 per month or £900 over a two year fixed-term.

But at the same time, it’s forecast that the average value of a home is set to climb by 3.5% by the end of the year, climbing to £277,470 versus the £268,087 today.

Mortgage saving swallowed up by increase to upfront buying costs

As it stands, the average homebuyer today requires a mortgage deposit of £53,617 and, from 1st April, will pay £3,404 in stamp duty.

Should they wait until the end of the year, the average increase in the cost of a mortgage deposit could see them pay £1,877 more versus today, whilst their stamp duty costs are forecast to climb by another £469.

As a result, waiting until the end of the year to purchase a property could see homebuyers pay £2,346 more in mortgage deposit costs and stamp duty versus the £900 they could save on a two year fixed-term mortgage.

Stephanie Daley, Director of Partnerships at mortgage advisor, Alexander Hall, said, “Whilst we’re still a few weeks away from the stamp duty deadline, the reality is that unless you’re nearing the end of your purchase, you’re unlikely to complete before 1st April and this means you’ll need to pay a higher rate of stamp duty.

It’s a considerable jump, with the average homebuyer in England set to pay £2,500 more, and so it’s understandable that with interest rates expected to fall further this year, some buyers may choose to sit tight in anticipation of improving mortgage affordability.

However, doing so could well cost you more, as 2025 is forecasted to be a far more buoyant year for the housing market. With house prices likely to climb, you may well find that choosing to wait it out could see you pay more for both a mortgage deposit and in stamp duty, versus the savings you’re set to make on your mortgage repayments.

The good news is that many lenders are already reducing their rates due to the greater degree of market positivity that has materialised so far this year and, by acting now, you can not only secure a more favourable rate, but you can also avoid any future increases to purchasing related costs.”