Why falling interest rates shouldn’t make you wan to buy a house

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Why falling interest rates shouldn’t make you wan to buy a house

13^th April 2025: The information below was correct at the time of publication but is subject to change.

Interest rates are on the way down. The Bank of England Base Rate has been cut three times in the last eight months, and word on the street is there might be more to come. But more importantly, SWAP rates, which are basically what lenders pay to get money before they slap their margin on and lend it to you, are also falling. Right now, they’re sitting below 4% for two, three, and five-year terms.

(If you’re not into the technical stuff, don’t worry. The key point is that this makes mortgages cheaper.)

But here’s what actually matters:

Falling rates shouldn’t be your reason to buy a property.

Yes, mortgages are a bit cheaper now than they were a few months back. But buying a home is a massive personal decision, not something that should hinge on what the economy or monetary policy happens to be doing this quarter.

If six months ago you weren’t ready to buy because of your personal circumstances, and nothing major has changed, then a slightly lower monthly payment shouldn’t suddenly change that.

Maybe you’re still figuring out where you want to live. Maybe your job might require you to move. Maybe you’ve just met someone and it’s serious, and it would be better to rent together first before going all-in on a house. Or perhaps things are going the other way, and you’re getting cold feet about someone. Whatever the reason, your circumstances matter more than the market.

On the flip side, if you were ready to buy six months ago but decided to hold off in the hope that rates would fall, congratulations, you called it. But ask yourself: how many homes have you missed out on in the meantime? And now you’re up against everyone else who had the same plan. Increased demand could easily push up prices, wiping out any gains you’ve made from getting a better rate. Once again, existing homeowners win!

Years after writing it I still stand by what I said here: Is Now A Good Time To Buy?

And here’s the crux:

You’ll only have today’s interest rate for 2 to 5 years. But your mortgage? That’s likely going to be with you for 25 to 40 years.

Interest rates are going to change. A lot. They’ll be lower than today at some points. They’ll also be higher. Yes, some lucky people locked in at 0.87% a few years ago. But what really matters is the average interest rate over the entire lifetime of your mortgage, not just the rate you get at the beginning. And no one knows what that average will be, not even the Bank of England.

So does it really matter whether you dive in at high tide or low tide when the tide’s always going to change? (Okay, not the best analogy. We can predict the tides thousands of years into the future. We absolutely cannot do that with interest rates.)

Look, it’s fantastic that things are a bit more affordable right now. But if the only reason you’re buying is because mortgage rates are lower this month than last, I’ve got news for you: rates will go up again. If that’s a dealbreaker, maybe homeownership (at least with a mortgage) isn’t for you just yet.

If you were ready to buy six months ago, great, carry on. I hope you’ve been house-hunting already.

If you’re only looking now because rates have dropped, but your personal circumstances haven’t changed and still don’t align with buying a home, sort that stuff out first.

And if you’re buying just because it’s cheaper than it was a few months ago, hear me loud and clear: it won’t stay that way forever.

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