Climbing the ladder in a cost-of-living crisis

It’s hard to read the papers, turn on the TV or look on social media without reminders of the rising cost of living. With everyone feeling the squeeze from high inflation and rising energy prices, trading up to a larger property might feel like an unrealistic prospect.

But life goes on and for growing families the option of staying put in a home that’s too small or no longer suits their individual circumstances might also be impractical. We caught up with independent financial adviser Abi Brammer from Fidenti, to cut through the media noise and understand the key financial considerations for those buying a house in the current market.

First things first, it’s important to think carefully about what you can afford. “Take into consideration any existing credit commitments you may have,” Abi says. “Ask yourself, is the house I’ve got my eye on going to be affordable both initially and moving forward?” Any existing debt may affect what you may be able to borrow and how much cash you have available to pay off the mortgage each month.

Once you’ve worked out what you can afford, the next question many would-be buyers tend to ask is ‘is now a good time to buy?’. But, according to Abi, this might be less important a consideration than it first appears. “If you are not considering buying, you’re probably going to rent. Rental prices are set to continue to increase with recent changes to taxation and interest rates. Regardless of when you buy, being on the property ladder has always historically meant that the value of your home will increase.  Yes, there’s the odd down period but once you own, you’re on the path to gathering equity in your home.” So, for first-time buyers, buying will normally be a better option financially than renting, and for those already on the ladder, market fluctuations are mostly irrelevant as, even if prices fall in the short term, this will also mean that the home you are trading up to will be cheaper.

If you have decided to buy, the next step is to ensure that you’re doing so as cheaply as possible. “Seeking professional advice has never been more important to ensure that the right lender and product is picked, specifically for your personal circumstances,” Abi says.

A range of exceptional circumstances saw fixed rate mortgages climb from 1.2% to over 6% last year, but rates have now crept down again, with lenders constantly repricing to remain competitive. “95% mortgages are back, self-employed borrowing has returned so, despite the odd challenge here and there, the available products are back to the norm, albeit with a bit of a weighting on rates,” says Abi. “There are lenders who offer a 40-year mortgage term which helps clients keep the monthly cost low while the cost of living is high and some lenders will lend up to age 75 for non-manual roles.  Lots of these products aren’t available direct, so it pays to shop around.”