[Closed] Is it silly to be thinking about getting a mortgage right now?

Personally I think that the UK housing market is still way overpriced, and is being artificialy supported by government policy, I believe that it will crash sooner or later, but then again it may not.
I would say if you can't afford it by yourself then no. not the time to jump into the market. Bottom line is that YOU should be comfortable paying the costs as a home, these special mortgages are still based on the notion as property as an investment, that horse has bolted and was a situation that should never jhave been allowed in the first place.

There is never a great time to tie yourself to a lifetime of debt, but if you want to own your own place then you will have to at some point so why not now?

Hmm, I'd say that with interest rates as low as they are go for it as long as you can make the payments and you are repaying the capital somehow.

I could barely afford our first place (7.98% mortgage!!!), could barely afford the second (doubled the mortagage) and am now in more or less my ideal house (it'a a bit Abigails Party, but the location and view - perfect). If I'd rented for that time, I would not be where I am now, and would be struggling to buy anything around here. I run a crap car but have a nice house, the reverse to most people I think.

You'll take more pride in any place you own, and as you chip away at that capital, with the odd windfall, you'll be in a better place in 5 years time. I have a family so if it all goes tits up I've got a world of stress - but every year it gets a little bit better. No point thinking like that anyway unless you've been told flat out, you won't get on with your life.

I'm sure I don't need to tell you - trackers etc. are great value at the moment if you can get the deposit, but be ready to fix if rates start going up and it's a struggle to afford. Worst case - as your single it's reasonably straight forward - get it sold before the bank do it for you, so you walk away at the very least owing nobody anything.

If you buy a house and house prices drop, then you have lost a bit of money. If you rent, you've lost ALL your money and always will.

Btw, there are house buying schemes near us where the builder is offering part ownership and such like, allowing you to start accumulating equity for little outlay. Heavily advertised by them (Persimmon) so you might have something near you.

Its not the lifetime of debt that puts me off, its the lifetime of sodding DIY. Anything needs doing round here, i tell the landlord, then go out on my bike.

My thoughts are that the mortgage value i'd be looking at would be less than my current rent payments. To get my rent to that level i'd be looking at a one bed flat. The concern of having a life time of debt doesnt worry me as much as paying someone else's mortgage for them. Ive kinda accepted that working in the industry Im in im never going to be particularly rich.

Supplementary question, is it bad to be considering a property that needs more work purely on the basis of the huge long garden suitable for dirt jumps...

Supplementary question, is it bad to be considering a property that needs more work purely on the basis of the huge long garden suitable for dirt jumps...

Not at all but I would refer you back to Sweepy's reply 😀

There's two ways of looking at the lifetime of debt anyway. If you carry on renting you can guarantee you will be paying out for the rest of your life. With a mortgage and a following wind you will one day own the place.
If you decide you want to go and carve nose flutes with an Amazonian tribe in 10 years time, you can rent the place out or sell up - more hassle yes, but something in it for you.

If you pay the right price and can do DIY you could be on to a winner with a fixer-upper.

If anything goes wrong in my place - I tell the landlord, wait 9months then have to withhold rent...

I have seen some of these part ownership schemes however having worked in the geotech industry and seen how a lot of the modern houses have been built and what they have been built on (inc cavity walls stuffed with general rubbish on site foremans instructions 'to save on skips') I wouldnt buy anything that hasnt been standing for at least 40 years.

Now is as good a time as any IMO.

But you may as well go to a well known Spanish bank, as at the rate they're buying everybody else, they'll soon be the only lender anyway.

And their customer service in the Shipley branch is truly, astonishingly awful

If I do - I wont be much better off (few quid a month) and besides maintaining the place I shouldn't be any worse off.

Bear in mind that the cost of maintenance can be more than you might think - even rental landlords typically count it as something like 5-10% of the mortgage cost, and they don't usually keep it up to the sort of standards you might want to keep your own house.

With the lend a hand mortgage thing, I'd be careful - if prices go down, your parent's money is locked up until they go back up again. If they stay the same, you have to wait until you've paid off 10% of the loan for it to go back to them, which could be 5 years or so on a 5% rate. If the 3 year term ends, and interest rates have got high, whilst prices haven't increased you could be stuck paying big money.

Joe

Another thing to consider - you will only ever be paying on the original loan + interest so there WILL be a point in the future (even if rates skyrocket) that you will be paying considerably less than renting, which will continue to increase year on year in line with inflation.

For example, my first house had a mortgage of circa. £250 a month. The house recently went up for rental with the present owner for £1000 a month.

So basically - had I stayed there I would either have a very small mortgage (or indeed paid off in full) whereas if I had started to rent it back then I would still be paying £1k a month and in=t would continue to rise every year.

for the size of mortgage I could get I'd actually be paying less than my current rent

If you can get a fixed rate deal for a few years and the above statement is still true it doesn't matter if house prices go up or down you'll still, both on a monthly basis and in the long run, be better off.

Personally I hope not as I'm appraching exchange and completion!

If you buy a house and house prices drop, then you have lost a bit of money. If you rent, you've lost ALL your money and always will.

It's not really as simple as that but I do think it's less risky to own than not to own. BTW, rent is the same as mortgage interest - it's all lost in that sense. The capital that could be tied up in a property could be invested - possibly safer in Unit Trusts than property at the moment.

Hmm, I'd say that with interest rates as low as they are go for it as long as you can make the payments and you are repaying the capital somehow

Have you seen what mortgage companies want in interest rates these days 4-6% tes Base rate is low but they wont give you a mortgage on anything like that rate.
Saem situation I dont know - if you get a long term fixed rate you will still have paid less than rent and if you own it you will have some capital

Personally I hope not as I'm appraching exchange and completion!

Me too!

I think house prices are about as low as they are going to go. So from that point of view its a good time to buy. However interest rates are likely to rise - so look at what your repayments would be if interest rates went up say 3%

Go for it would be my view

+1 for MF. My parents' mortgage would have been £180/mo or something daft had they not moved to France at utterly the wrong time.

its the lifetime of sodding DIY

Yeah, you can use the money you've saved on not renting to fund furniture, new bathroom bits, insulation, curtains etc etc etc etc etc etc etc etc etc...

Housing market is over priced but it isn't going to totally bomb, it would have already done it in '08.

I would be looking to get on the housing market now if I was in your position, if there is a recovery in 2-3 years you will be kicking yourself. I bought my first house in 2000 using a credit card for the deposit, prices subsequently rocketed. If I hadn't have bought when I did it would have been last year before I could have afforded the deposit for the house I live in now and the mortgage payments would have been £500 a month more.

If you are in a position to buy then go for it.

It's up to you to do your homework and draw your own conclusions I guess.

I've looked into it seriously over the last few months as I'm in the same situation with a large deposit saved. No one really knows what will happen to the UK housing market. Many are predicting a big crash, others a leveling off or slight correction in prices.

What is clear though is that houses are certainly expensive (many would say well overpriced). From reading up on things I have drawn my own conclusions from all the evidence there is out there. I could be totally wrong but I think that prices will fall considerably over the next few years due to:

- Loans harder and harder to come by.
- 25-40% deposits required by many (but not all) banks to get a decent mortgage rate.
- Looming mass unemployment and cuts in the public sector.
- BTL often not profitable or sustainable now that equity is no longer rising.
- Almost total absence of 100% and self cert mortgages (which helped to massively inflate the housing bubble in the first place).
- Currently many more homes coming onto the market than buyers willing to spend.
- Total lack of affordability for most first time buyers.
- House prices currently static despite all the artificial support offered by the government and BOE (what happens when this is taken away)?
- Huge volume of bad debt in the mortgage industry, the extent of which has been hidden up to now by mortgage support and record low interest rates.
- Sharp increase of capital gains tax on investment property.
- Interest rates can only go one way from here.

All these factors point to a market that is living on borrowed time, however I'm sure someone else will be along soon with a totally different opinion.

I'm going to hang on for a bit and wait to see what happens when the public spending cuts in October get announced. Hopefully will be better placed to make a decision then but for now (for me) its just too risky to buy.

we're doing it at the moment. Rates will get higher, there is never a good time to get a mortgage. My sister nearly bankrupted herself buying a house for 70k in 1999. Just sold it for 160k and she's laughing. get it out of the way, you'll be skint for a while but it'll get better.

For the last 16 years ive lived in houses I could never afford to buy in a million years, Im looking out of my window at cairngorm right now. The time may come when im forced to live in some crappy little rabbit hutch on an estate, but it wont be till im older, if I bought id be there now.

This seems very much to be personal preference. If it doesn't phase you then it's largely fine.

I called top on the market waaay too early, endlessly didn't buy, eventually got badgered into it when the bubble was really looking bursty, spent my capital on deposit, fees, SDLT, furniture etc, watched prices tank, separated from my wife, ended up in negative equity with no ability to re-mortgage the sodding thing, she's living in it and I'm funding my rent and half the mortgage.

Compared to staying in a manky flat saving a shedload of money and wasting a bit in rent, I've effectively wasted all the risk capital I'll have until my parents die on buying the bit by which my house was over-priced against any sane market, together with transaction costs. I'm now buying the other bit, with money that over the term of the loan will cost me £1 in wasted interest for every £1 worth of value gained. Hopefully, hyper-inflation will somehow wipe out the debt without triggering massive interest-rate rises which will result in me falling behind on repayments and having the stupid thing re-possessed, for a total loss.

It's all good fun. 😀

Mortgage may be slightly cheaper now - but the current low interest rates are completely unsustainable longer-term. If I was doing it, I'd want a long fixed rate. How would you fare if your mortgage interest rate was 4 or 5% higher than you're being offered now? Would this be a place you could live in for 10+ years (if you're one day planning a family, would you have space for kids), in an area you're happy to commit to living in if you end up stuck there?

Do you have a decent emergency fund of at least a couple of months salary? Can you afford the various fees involved in buying a house, on top of the deposit, leaving your emergency fund intact?

Personally, faced with paying a mortgage or paying the same in rent, I'd rent any day. Easy to change where you live if you needs change, if a great job comes up 50 miles away, if the neighbours from hell move in. No maintenance worries, no DIY, no paying buildings insurance. Paying money to a landlord is no more "wasted money" than paying it to a bank in interest.

Interest rates may be low but the rates they're offering to first time buyers with small deposits (10-15%) aren't ~ around 6% so I'm not sure getting into the market now because interest rates are low is particularly sound advice.

Shared ownership schemes, at least round here, are a bit of a con and in my opinion help maintain high house prices. When you compare with buying outright it seems you get 75% of the property but pay 90% of the true value. That's not even considering it'll be the size of a shoebox and if you get a shed to keep your bikes in it'll take up most of the garden.

I think house prices are about as low as they are going to go.

Are you an estate agent? I think many who have bought in the last few years tell themselves this, and desperately want to believe it. A friend of mine who bought a place just before the crash was 'confident' that his place would be unaffected and would hold it's value. He's now looking at about £30-50,000 negative equity. He's not very happy, as he's spent loads doing the place up, all for no extra value. Now he's got 2 kids and his wife isn't working, he's really struggling and will probably have to downgrade/sell up completely. I do feel for him, but then he was arrogant and naive in buying at the top of the market. My landlord is locked into a fixed mortgage, and rental values are falling. There's no way he can put my rent up, as I'll just move out. He'll then struggle to rent the place at it's current price. His mortgage isn't for much less than what I pay him in rent. With works needed for water damage that happened last year, he's about to get stung for a bill for a good few grand. His job isn't looking particularly secure right now either. I'm not all that sympathetic, and I know I can simply move out without any real hassle. Sometimes there are benefits to being unencumbered by debt.

Both cases of people overstretching themselves, borrowing too heavily and getting out of their depth. I fear this will continue for some time, and many people will lose their homes.

We're buying a house we'll be happy to live in for the next 10 years, our jobs are reasonably secure, and even if we were both flipping burgers in maccy d's we could just about afford the repayments. The house is in Nottingham, but hey ho...

As a landlord, I say you're better off renting. As an owner occupier, I say buy soon, and the biggest you can genuinely afford. Can't imagine that helps much though. I am sure though, that round here property prices are still falling, fuelled mainly by repossessions, not all through unemployment, but more from family splits/equity release mistakes and the subsequent inability to re-mortgage now banks want a substantial deposit. Only buy if you've driven a very hard bargain and are very sure you won't want to move for the next five years, as selling in a falling market is tough, and banks are loading mortgages with upfront fees to get the profits in early. If you are going to buy, you want to get to your ideal house in the minimum number of moves, as it's the moving which throws away cash.

Ive just bought a place using the lend-a-hand mortgage. I'd recommend it: your folks gain interest on the money they'll lend you as well as getting the capital back in approx 3 years (10% equity owned from repayments). it also gives you a fixed rate of 5% interest (2 years) which is probably the best you're gonna get as a first time buyer with little deposit.

I'd have a scout round and put some cheeky offers in using your first time buyer status as leverage for money off and a quick deal.

Again new mortgae rates are not low at the moment the interest rate is low. Not he same thing. I cannot get below 5% at present despite 15% deposit

Currently many more homes coming onto the market than buyers willing to spend.

House prices have been going up for a while, which doesn't support that idea.

However, it's worth noting that national or even regional statistics are not important. The LOCAL market conditions are. So it depends heavily on where you are looking.

I do feel for him, but then he was arrogant and naive in buying at the top of the market.

What an odd thing to say! Haven't prices in most places recovered most of their losses now? Anyway, it all depends on how the economy goes and we all know tough times are coming. I wouldn't stretch myself now if I was looking to buy.

If you are going to buy, you want to get to your ideal house in the minimum number of moves, as it's the moving which throws away cash.

Well only once you get into the higher stamp duty brackets.

no that stat is corrrect. the thing is to be sustainable you need new pwople to enter the market , like in a pyramid scheme, by buying the cheap house to allow everyone to move up. Very few peole can do that now so at some point the market must react to this reality. When and how is the big question and frankly no one knows the answer. I suspect that in 25 years time you will be better off buying than renting as you will have paid less in housing costs and have an asset to your name.

House prices have been going up for a while, which doesn't support that idea.

Molgrips, you are correct, houseprices have surprisingly been going up for a while but this is possibly unsustainable. This I suspect has been due to the lack of quality homes up for sale over the last year or so.

Recently there has been a big influx of property coming onto the market in most areas. Partly due to the suspension of HIPS and partly I suspect BTL trying to get out of the market. This seems to be why the prices are static or just starting to dip (depending on whose reports you read).

A steep rise, followed by a small crash and then another rise again looks very much to me like what's called a 'DEAD CAT BOUNCE'. For anyone unfamiliar with this term please see the 'return to normal' peak on the link below. This is what's known as a 'DEAD CAT BOUNCE':

[url= ]DEAD CAT BOUNCE[/url]

The fact that the banks now want big deposits is a sure sign that the banks think that there's a high risk that prices are going to come down and quite a long way. Big deposits are being used to 'cover their arses' in this respect.

The fact that the banks now want big deposits is a sure sign that the banks think that there's a high risk that prices are going to come down

Well yes but it's a lot to do with the likelyhood of loan defaults - job losses and the like.

Big deposits are being used to 'cover their arses' in this respect.

I think that's true, I know people who've been refused a mortgage on a particular house with a 15% deposit because the bank's valuation didn't tie up with what they were offering, I'm guessing that the bank's don't care about this too much when there's a bigger deposit on offer.

to be sustainable you need new people to enter the market

This is true. You need first time buyers coming in at the bottom. Currently most can't afford it. Apparently something like 80% of them need parental help. The very parents who profited from the massive boom. I'm not an expert by any stretch, but if 80% is right it could well be that the current market - which is inaccessible to most first timers - is still riding on boom money. It's the same sketch as 100% deals and self-certs i.e. people buying property they can't in reality afford. It distorts things.

As a prospective single first-time buyer myself I can't afford to get on the (Glasgow) ladder. Even if I could I'm not sure I would.

Been thinking some more, and in reality it's a bit pointless talking about the national average stats. It all depends on the type of house you are selling or buying, and the area.

For example, in some places there is a big surplus of 2 bed flats for first time buyers, depressing the market, but a shortage of say 4 bed executive houses for people to move into once they are successful and have a family.

It's really different markets, although they are linked.

No you'd cover missed payments with interst rates, simplisticly base rate+5% interest rate, 1 in 20 don't pay-up in any given month, you break even, less than 1in20 and your in profit.

Then if the missed payment turns into default and a reposession, then the deposit is to account for the drop in value over that time.

I'll be renting for a while yet, the interest only mortgages are about the same as our rent on similar places.

The fact that the banks now want big deposits is a sure sign that the banks think that there's a high risk that prices are going to come down

Well yes but it's a lot to do with the likelyhood of loan defaults - job losses and the like.

Yes, but if people default on their loans and the bank is forced to issue a reposession order then it is [b]still at no risk - provided property prices remain static or keep rising[/b].

[b]So the risk in the banks eyes must be that the property market is going to fall (possibly considerably)[/b]. By putting up a big deposit then it is the homeowner who takes the risk and not the bank.

This is also partly why banks heavily load the interest onto the front of a mortgage. You only seriously start paying off the equity on a house towards the end of the mortgage term.

Yes, but if people default on their loans and the bank is forced to issue a reposession order then it is still at no risk - provided property prices remain static or keep rising.

Except that when you sell a repossessed house at auction, you typically sell at 80% or less of original market value, possibly way less if whoever lost it left it in a bad state which I understand is not uncommon when people are chucked out of houses (things like radiators/plumbing damaged or removed, or wiring messed up etc). You've also missed out on months of interest payments, spent money on legal fees etc).

This is also partly why banks heavily load the interest onto the front of a mortgage. You only seriously start paying off the equity on a house towards the end of the mortgage term.

No the only reason for paying off mostly interest at the start is economics!

We're buying a house we'll be happy to live in for the next 10 years, our jobs are reasonably secure, and even if we were both flipping burgers in maccy d's we could just about afford the repayments.

Sounds like you're living [i]within[/i] your means, what a novel concept! I think far too many people have stretched things to such a limit, that if any crisis happens, they've simply got no buffer zone at all, no contingency plan. You've probably had a right result really. Nottingham? Could be worse.

What an odd thing to say! Haven't prices in most places recovered most of their losses now?

Well, I'm very sceptical about that. This bloke paid a hugely overinflated price for his place, with the view to doing it up, making a profit and moving up the ladder. He's added another room, at great cost (shortsighted plans didn't reveal the extra work that needed doing), but the value of his property has fallen so much that all his investment has been wiped out. He's recently found out his garden has serious issues which could affect neighbouring properties, needing very expensive remedial works doing. His plan was to sell up, make a profit, get a bigger place. He'd be lucky to find something the same size in a less desirable area now, so he's sort of stuck. Big dreams, but sadly not enough grounding in reality.

By contrast, I know a woman who bought a place nearby years ago, had a boyfriend who did it right up at minimal cost, kicked him out, sold it at the top of the market for about 3.5 times the initial cost and even after the building/interest etc still made enough to buy a really nice place in Cumbria with a fair bit left over!

As a landlord, I say you're better off renting.

My landlord wouldn't agree with you! Poor sod overstretched himself (see a pattern emerging here?), got the cheapest mortgage he could afford, which has now turned into the most expensive one he could have (fixed rate). I've seen one of his statements; he makes about £70 a month profit. Factor in the insurance, costs of a new washing machine, botched leak repairs, new electrics to replace the shoddy originals (never employ cowboys), and a whole host of other problems, and he's made a loss while I've lived here. And he can't even increase the rent to compensate for this. But he was looking too much to make a profit without considering all the pitfalls. Did everything on the cheap, does lots of overtime to get extra cash, but he'll not see any reward. It's his greed that has led to this, hence why I have little sympathy. It works well for me though. Unless he decides to sell, there's no way he'll dare to kick me out.

Too many people simply don't understand that the property market, like any market, has it's risks. And when the stakes are this high, it does well to be aware of the consequences.

It was the 'arrogant' bit I thought odd!

Except that when you sell a repossessed house at auction, you typically sell at 80% or less of original market value

Yes but if that happens the mortgage borrower will still owe the remaining 20% not covered by the sale of the house.

No the only reason for paying off mostly interest at the start is economics!

Not sure what you mean - you'll have to be a bit more descriptive than that 😕

To start with you owe, say £100k with a rate of say 4%. So in the 1st month you pay interest on £100k and a little capital. The next month you owe slightly less than £100k so you pay interest on that and a little more capital. In the final month you owe a few hundred quid so you pay a little interest on that only.

Ah - got me on that one 😳

It was the 'arrogant' bit I thought odd!

Well, I suppose entering a situation that you have very little knowledge/experience of, and assume you will succeed in spite of warnings could be considered arrogant, yes. Caveat Emptor and all that. He's not the only one.