What is the advantage of waiting for house prices to weaken?

Lets take a simple example in which a homebuyer purchases a house using a 100%, 25 year repayment mortgage at an interest rate of 6%.

Option 1
A buyer purchases a house in the current market at £200,000.

The total amount the buyer pays back over the 25 year term is £386,581. This is the total amount it has cost to buy the house.

Purchase price of the house                           £200,000
Total cost of house over 25 years                  £386,581
Annual Payment                                                £15,463
Monthly Payment                                               £1,289

Option 2
Now lets examine the picture if the buyer purchased after a modest 25% fall in property prices. The price of the house is now £150,000. The buyer again takes out a 100%, 25 year mortgage at 6%.

Purchase price of the house                           £150,000
Total cost of house over 25 years                  £289,936
Annual Payment                                                £11,597
Monthly Payment                                               £966

Conclusion
By purchasing a house at a lower price, the buyer has saved £96,645 over the 25 year term. This equates to £3,866 per year or £322 per month. That saving could pay for a holiday or several meals out per month. Alternatively, you could plough that money back into paying the mortgage, being mortgage free after only 15 years, some 10 years earlier than in Option 1. The opportunity to retire 10 years earlier sounds good to me!

Play around with the Buy vs Rent / Mortgage Calculator to determine how falling house prices will benefit you.