Simon Read: How to avoid being caught out if the property bubble bursts

The Bank of England’s base rate has never been lower and the new Governor, Mark Carney, has signalled that rates may not rise for three years.

Meanwhile, competition among mortgage lenders is getting more fierce, leaving average five-year fixed rates at 3.83 per cent, the lowest they’ve been for some time.

It’s no wonder more people are thinking about getting on the property ladder or taking advantage of the attractive headline rates to move home. Especially as the latest survey of estate agents from RICS, published today, shows that home prices grew last month at their fastest rate since the market peak of November 2006. That raises fears that if you don’t take advantage soon, the affordability of your dream home may yet again climb beyond your reach.

And there are many ways that – even if you don’t have enough of a deposit – potential borrowers can climb on to the property-owning bandwagon. But before you leap it’s worth heeding the warnings from some economists that a housing bubble looms. If the bubble bursts, as some predict, that shiny new home could prove a financial drain, especially if you’ve stretched your finances to buy it.

But such uncertainties have been a feature of the mortgage market for much of the past six or seven years. With that in mind, it’s wise to look to buy a home that you may be happy with for some years, rather than a property that you hope to sell at a profit in a year or two. If there is a bubble and consequent price deflation, you’re more likely to end up in negative equity, owing more than you borrowed and stuck with a property you can’t sell.

Given that, there are several ways for the short-of-cash to buy a home, not least through the Government’s Help to Buy scheme. It offers loans of up to 20 per cent of the value of a new-build property in England and will start part-guaranteeing mortgages across the UK from next year.