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UK Property: Time to Buy or Ticking Time Bomb?

Fortunes are made and lost the world over through property.

With some of the most expensive Real Estate on earth, the UK can be a great indicator for global property health.

Whilst Covid redefined the economic landscape for billions of people globally, given confidence in the Pound, and the perceived stability of UK property, we thought it was time we explored what impact, if any, Covid’s actually had on the fundamentals.

On the surface, a range of factors suggest it's (currently) a bit of a disaster.

Many commentators, including Martin Lewis (a leading financial commentator in the UK) believe that rising interest rates are a "ticking time bomb". He’s even warned homeowners to act quickly to lock in their rates, or refinance sooner rather than later, as mortgage rates skyrocket.

So let's explore whether it’s time yet to go bargain hunting…

Just last month, energy expenses increased by 54%, with even higher costs projected later in the year.
Just last month, energy expenses increased by 54%, with even higher costs projected later in the year.

Let’s first address the elephant in the room. There's been an astounding increase in the cost of living In the UK in recent months. Eye watering statistics, quoting worst in 40 year numbers, simply litter front pages nationwide.

The cost of borrowing (loans, interest rates and mortgages), energy, and food have all risen post Covid, and the property market’s starting to bear the consequences.

After predictions that inflation could reach 10% within months (currently 9.1% at time of writing), the Bank of England raised the rate it pays other banks from 0.25% to 1% (the highest it's been in 13 years).

The minority wanted to raise it even higher, to 1.25%.

This decision raises the cost of borrowing, such as the interest rates for loans, credit cards, and mortgage payments.

Naturally, homeowners are concerned about how these numbers may affect them, and when.

Impact on mortgage rates

As mentioned, inflation has now risen above 9%, the highest it's been in 40 years!

This has contributed to the rapid rise in mortgage rates.

Six months ago, mortgage rates were as low as 1%, but now many have doubled, with the cheapest options hovering around 2.1%

The popular, two-year fixed term mortgage might result in up to ten remortgages over the life of the average loan. Experts estimate that it could cost up to £10,000 in arrangement fees alone, with additional fees to pay each time.

Martin Lewis suggests that "homeowners could do better to look for a longer-term fix of 10 years or more to safeguard themselves against further interest rate spikes and volatility for the duration of their mortgage."

Learn more about Martin Lewis's mortgage ‘Ticking time bomb’ warning.

Should homeowners and movers brace themselves for a slowdown now that the stamp duty holiday has ended?
Should homeowners and movers brace themselves for a slowdown now that the stamp duty holiday has ended?

But house prices seem so high..

As a result of government intervention to address the economic impact of Covid, from July 2020, up until the 30th of September 2021, home buyers in England paid little to no stamp duty (tax) when buying or selling a property. This was huge, and largely unprecedented.

The effect on the property market, already showing serious Covid cracks, was immediate.

This tax relief saved buyers thousands of pounds per purchase and injected billions of pounds into the Real Estate maket, artificially inflating it.

Until now.

So what was the stamp duty holiday?

Stamp duty is a tax you pay if you're buying a home in England or Northern Ireland over a certain price.

To prop up the property market during Covid, the government announced a stamp duty holiday - little to no stamp duty tax was required.

Stamp duty was removed for the first £500,000 of a property transaction completed by June 30, 2021. This was "tapered" until September 30th, 2021, which means homeowners didn't have to pay stamp duty on the first £250,000, saving up to £2,500.

As a result, the housing market continued to expand, despite all logic, and any economic pressure to the contrary.

The decision behind the recent stamp duty holiday was largely based on the success of the previous stamp duty holiday following the financial crisis in 2008.

Was the stamp duty holiday successful?

The real estate market seemed to benefit significantly from the stamp duty holiday. Solicitors, agents, auctioneers, marketers, builders, tradespeople, property websites, buyers and sellers all seemed to enjoy a windfall, at the expense of the tax take.

During the first holiday period (which ended in June 2021), 1.3 million buyers in England paid no stamp duty on the first £500,000.

Consequently, estate agents reported a surge in enquiries and house prices increased at the highest rate since 2004. Stock ran low and prices in many areas (especially outside London) soared.

However, the growth did slow down after June 30th, 2021.

Compared to the previous month, the finished home transactions were down 63% in July. Nonetheless, house price growth remained solid at 10.5%.

Many now argue, this is the beginning of the end for house price growth in the UK for quite some time.

What will happen now?

As of September 30th, 2021, the stamp duty holiday officially ended. What will happen to the property market in 2022?

Predictably, property transactions have slowed considerably in 2022, since the stamp duty holiday ended.

If demand for real estate remains robust, prices are likely to rise further, although at a slower pace. However, there is a potential that they will remain stagnant or perhaps fall.

Recent headlines around the “Cost of Living Crisis” do nothing to encourage people to extend their mortgage or move homes.

In response to recent concerns regarding the housing market, Chancellor Rishi Sunak has proposed an immediate stamp duty land tax holiday for homebuyers in England and Northern Ireland.

Here we go again.

If his proposition is successful, buyers of homes worth up to £500,000 will no longer have to pay any stamp duty tax.

This is estimated to save the average homebuyer over £2,000, helping to boost a housing market still suffering from the COVID-19 property freeze.

Effectively, government policy is acting as artificial accelerant to fire under the housing market. Most investors agree that artificial measures and government policy swayed by headlines, are a sign of desperation in a challenging economy. Investors then must generally beware.

That said, a golden rule in investing is to buy low and sell high. Nothing breads profit like market instability.


The cost of living, taxes, and mortgage rates are all rising. Additionally, the stamp duty holiday has ended.

As many households in the UK are now coming off fixed term mortgages, and looking at new rates double, or triple what they were paying, along with tougher affordability tests, it may soon be time to focus again on distressed property sales.

Best give it a little more time. In our opinion, the next year or two will flush the real numbers. Increased costs will take their toll on the average house and many more people will be selling holiday homes, buy to let investment properties, or downsizing their primary residence completely.

The best time to buy property again in the UK is probably in 6-18 months once we see the true impact of Covid-19 on the market and mortgagee sales.


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