Is it a crap time to buy a house?

[DrDonnyBrago]

Didn't wish to derail the other interest rate thread.

I'm a noob to this, so, is it currently a bad time to buy a house?

Wife and I are looking to buy. First house and all that jazz. Interest rates are low, property prices are very high. I could handle repayments up to about a 10% interest rate before having issues, more if I were to overpay the <=10% each year whilst the going is sweet.

When interest rates rise, property value drops and all the house noobs the government encouraged to buy are left with negative equity and huge repayments.... sound about right? So just a gamble on when and how severely?

[mjn51]

I would say buy, as house prices have settled down from the giddy highs of early last year, I don't think interest rates are going to rise for 12 months and if they do it wont be by much. If you wait until spring the house market tends to start moving again as people get out and look at new houses.
M.

[dydey90]

I hope not. I'm looking at taking the plunge in the next year or so.

The help to buy scheme has pushed the budget from about £140k to £200k with little difference in monthly repayments, it's just that we'd have to shift the loan in £20k lumps or keep the house for 15 years to break even. By which I mean pay off the £40k loan and have enough equity left for deposit on the next house.
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[Rogerborg]

[Copycat73]

from this point in time imo.. house prices will rise all be it very slowly.. there are scheams to assist but the lendin criteria is stricter than it once was...interest rates are low and will remain so for 12months or so
so i would be buyin.
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[Itchy]

Buy it when you need it.

Life is too short to wait forever.

My personal thoughts are wait until after the election.

From my point of view the government has been blowing another bubble in an attempt to win the election. As such they have inserted all sorts of props. Once those get kicked away...
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[dydey90]

[Rogerborg]

Bubble blowing, sure, but ...

[Itchy]

[daemonoid]

Any fluctuations will be temporary (barring major international issues) until the UK has sustained house building above quarter of a million houses.

Right now, business benefits from limited supply, house owners the same. There will be little political will to change that unless we get an idealistic labour PM*, and the Labour Party changing the centre makes it unlikely that will happen any time soon.





*certainly not a desire of mine considering how they left it last time...
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[Rogerborg]

[Itchy]

[Rogerborg]

Mortgages are the biggest debts though, and haven't they been throttled back by 'prudent' lending since 2008?

I'm fairly confident that plenty of folk will still happily over-borrow given half a chance, in order to get their wife's dream home. Safe as houses, innit.

Should be interesting finding out.
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[The Shaggy D.A.]

Negative equity is only a problem when you want to sell, so is not as scary as it sounds. I bought in 87 for £51500 and like Keith went negative. Paid it off early after 12 years and it's now valued around £130k, so zero fucks given.
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[map]

I did read when I bought my house that even with the ups and downs of interest rates etc. that house prices sort of double every 10 to 15 years. You just need to time your sale on an up, which is the hard part.

I was also told if you want to get on this housing ladder roundabout (mixing metaphors) that you need to buy low, upgrade, enhance and then move on and upgrade after about 5 to 10 years before the next price hikes (assuming you want a place to live and not just property magnet types). Then at the end you start to have a home and a nest egg for your retirement when you downsize. That's the theory anyhow.


PS. the above may just be bull but on the surface would seem to have a grain of believability.
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[Itchy]

[Copycat73]

[Robby]

My personal view is that now would be a poor time to buy.

I bought my flat 5 years ago. It has more than doubled in value in that time. When I bought it I was single.

I am now married, and making a fair bit more. Even so, we would just about be able to buy my flat now. Not a chance of buying a house in the area.

If a married couple with a decent income can't afford a normal sort of home, then prices are too high. They may stabilise, I can't see them going much higher unless wages rise - people won't be able to afford them.

I would certainly wait until after the election. A few of the parties have made noises about building houses, others appear unimpressed by the help to buy scheme. Various kinds of rainbow coalition would support action that ends up in a house price crash. It would be nice if they all stopped making bubbles too.

[arry]

[BakesBeans]

[james1988]

Myself and my fiance have just bought a house together. We saved together the cash and went for a 95% mortgage. I realise most people would say that we were stupid doing so but the amount that we can afford to over pay over the next two years (2 year fixed rate) and add in the fact that it's affordable for us to buy now, meant that renting was just a total waste of money.

Our mortgage has an interest rate of 6.05% which is quite high compared with the interest rates offered if you have a 10%+ deposit. However, I needed to be out of my mothers (family circumstance) so we went for it.

Trying to get a 95% mortgage with Lloyds was an uphill battle all the way, we passed their affordability checks but there were even more at the underwriting stage, where Lloyds decided we needed to produce further payslips (my other half works for the council but they recently renewed contracts, which, just so happened to fall in the middle of our mortgage offer).

I found that most banks won't even entertain the idea of a >90% mortgage or in some cases >85% mortgage unless you're already a customer of theirs.

Was it the right decision? I'd like to think so but only time will tell. I'd say go for it.

James
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[Furrybiker]

Frankly it is never a good time, but I have been having this type of conversation for at least 30 years.

14 years ago I jumped into the world of the mortgage, I now could not afford my house. A mate bought a derelict flat in SE London for £250,000 about 3 years ago, now nicely renovated it is worth over £600,000 and he couldn't afford it either! My house "earn't" over twice what I did last year.

Granted these are London prices, but my advice is do it for the long term, short term as has been said negative equity is a possibility but keep calm.

In the very long term you may be able to pay off your mortgage, let the house and look for somewhere else, thus topping up a pension and giving you more options.

[GSTEEL32]

House Prices bear no resemblance to "worth" anymore, they're calculated based on affordability.

As house prices have outstripped earnings, they bear no resemblance to what is "reasonable", they are simply a calculation of what people can afford to finance on a monthly basis.

Mortgages used to be 20 to 25 years repayment. This is no longer the case. You can, age willing, take 35 years on your mortgage.

So in effect you have, say, £400 a month to spend on your house. 10 years ago, on a repayment, this would have equated to about £80k. Now, with the advent of longer mortgages, this equates to £100k.

So house prices can go up 25% and your average punter on the exact same wage can manage the same monthly payments. So house prices go up without a similar uplift in income.

Given that we are all living longer, with most of us retiring later, I can only see house prices moving in one direction. *


* this assumption also ignores the fact the population of the UK is growing exponentially from increased child birth, longer living ages & mass immigration....

[stinkwheel]

It's ALWAYS a good time to put your money into bricks and mortar. Especially if it's a house you intend to live in for some time to come.

If you don't overstretch yourself, you have a house to live in, almost certainly paying less than renting one, which you will eventually own.
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[JonB]

I've just pulled out of buying a house as I have just found a better one 15k cheaper.

For me, the mortgage is the same as my rent on a 5 year fix. I've managed to save up a 5% deposit and with Help to Buy secure a mortgage at 3.06%. Over the next 5 years I'm just going to overpay all I can to inject capital into the house before absorbing the 20% provided by the government.

In hindsight, I should have bought 5 years ago, but hindsight is a wonderful thing.

However, a joint income of over £60k will struggle to get you bigger than a 3 bed around Bristol*, so there has to be a ceiling to prices somewhere.

*non scummy bits.
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