So its a good time to buy a house…

…but is it a good time to be at your maximum budget for one?

So, one can fix anywhere between 1-3 years, but what chance of a significant interest rate rise over that period vs the impact of waiting 3 years and saving a bigger deposit taking into acocunt property price rises?

My gamble would be on the interest rates staying low for a good long while – right?

i’m expecting another dip in prices over the next couple of years. no evidence to back it up but i’m fairly convinced we haven’t seen the second dip in the recession, unemployment still rising at the moment etc etc

its an intresting question and interested in more educated answers 😀

Which is a huge gamble! With rates as they are you can’t afford to be stretched at the moment or when your fixed deal ends in 2-3 years you could well be in a whole world of trouble.

Yes, but, you need to be secure enough employment to pay the mortage…

“Houses are machines for living in”. Don’t expect them to rise in price for many a year, in fact a further declines are more likely.

Read recently that economists now think BoE rates won’t rise for another 4 years 😯

Obviously this is not financial advice and I certainly WOULDN’T max out my mortgage borrowings now, not a hope – the global economy is in a hopeless mess and anything could happen.

No way would I max out my budget while interest rates are this low.

Even a rise over the next few years to more ‘normal’ levels would leave you pretty stretched I would have thought.

Look at an online mortgage payment calculator, put in your current situation and then put the interest rate up by a few percent.
It’s quite eye watering what a few percent will do to your monthly payments.

Remember that all the QE is pumping inflation into the system and it will have to be adressed in the future…

There is a view that property is currently overvalued, which is one reason that lenders will not go above 80%.

But negative equity isn’t a problem if you can afford the repayments, and renting costs a lot, and we all need somewhere to live, and having your own place is a good feeling.

If you find somewhere you like, and you can afford it – why not?

House prices round me are going up, dramatically. The different price layers have been affected differently but in general house prices are not going to drop significantly again.

I’m in the same position.

Define ‘Max out’?

If we were to lose one income and interest rates stay as they are then we can meet all of our otgoings (including a healthy food budget) on one salary but with very little, if not nothing to spare. Does that count as being maxed out, or is being maxed out where you are in the same position (ie no spare cash after all outgoings) on both salaries?

whether a house’s price will go up or down is going to depend on where it is.Where I live prices are stable with certain types of property going up in price,move 5 miles down the road and prices are falling.

What effect an interest rate rise will have surely depends on the mortgage size £50k morgage 2% rise fine £150k mortgage 2% rise ouch.
You can get a 5 year fix at 3.29% at the moment,which is what I’ll be doing when current deal ends

Where do you live ? London prices are at record levels in a lot of places due to big inflows of foreign money (property looks cheap as GBP is so low). Outside London we’ve seen price corrections so there is more “value”.

A house is for living in, I’d say it’s pretty ballsy to “max out” at the moment, job security is low, IMO interests rates will be pretty low for 5 yrs but that’s an indication of how weak the ecomony is. I’d say if you find a house you like go for it but keep some cash in reserve.

BigJohn – lenders shouldn’t go above 80% full stop for a first mortgage. had they followed that rule and checked people’s income we wouldn’t be in this mess.

and renting costs a lot,

Define ‘costs’

My missus keeps telling me this, I keep pointing out that the value of a house is falling/stagnant and the interest on an 80% loan is more than the rent on the same house, and renting you get to keep 20% of the value of the house safely in cash.

If prices were still spiralling upwards I’d agree, but for the short term it makes sense to rent and save for a bigger deposit on a cheeper house in 3-4 years.

If prices were still spiralling upwards I’d agree, but for the short term it makes sense to rent and save for a bigger deposit on a cheeper house in 3-4 years

If you could guarantee that then there may be merit in that concept but you don’t *know* you could get a cheaper and bigger house in 4 years.

I am hoping that is the case as in 4 years time I hope to be mortgage-free but couldn’t really afford to make the next step up in my area if prices stay the same as they are now.

Prices have stagnated, they can only go up. I am talking significant variations not the 1% monthly variation evyerone goes on about.
As soon as prices go up the difference in cost in upsizing is magnified. So now is good time to upsize bad time to downsize.
I just fixed at 3.5% for 5yrs, I dont see a real downside to that.

Prices have stagnated, they can only go up

Look out Warren Buffet, you’ve got competition.

Prices have stagnated, they can only go up.

that’s the kind of bullsh**t that got us into the current situation.

only this graph shows different to you way of thinking.

Prices have stagnated, they can only go up

The return of the property dreamer…

lets take it back to ’95… decent house prices and fresh prince of bel air on the TV

thisisnotaspoon – Member

and renting costs a lot,

Define ‘costs’

My missus keeps telling me this, I keep pointing out that the value of a house is falling/stagnant and the interest on an 80% loan is more than the rent on the same house, and renting you get to keep 20% of the value of the house safely in cash.

If prices were still spiralling upwards I’d agree, but for the short term it makes sense to rent and save for a bigger deposit on a cheeper house in 3-4 years.

Posted 16 minutes ago # Report-Post

mastiles_fanylion – Member

If prices were still spiralling upwards I’d agree, but for the short term it makes sense to rent and save for a bigger deposit on a cheeper house in 3-4 years

If you could guarantee that then there may be merit in that concept but you don’t *know* you could get a cheaper and bigger house in 4 years.

I am hoping that is the case as in 4 years time I hope to be mortgage-free but couldn’t really afford to make the next step up in my area if prices stay the same as they are now.

Without going into details we are in the lucky position of paying £250 a month renting and saving a sunstantial amount for a deposit (also that means living slightly sub standard to our means), so the above statements interest me. My bug bears are:

a) We’d like to have a 2nd kid this year and our 2-bed house is overcrowded as it is
b) I’d like to have paid of a mortgage before I retire (I’m 39 now)
c) I really want a place of our own.

Thoughts? Stick with it for a few more years and “cope” by which time the size of our deposit would put us in a much more comfy position maybe?

In terms of prices my take is they are going to stagnate and stay at the current high level.

There’s plenty of demand, that won’t change. People need a place to live.
There are plenty of people (relatively) out there with money. They’ll buy to let because they know they can rent out, that helps keep prices up. And they’ll hold not sell.
Most people can’t raise the capital to buy, they’re obliged to rent. They longer they do that the harder it is to stop.

Also people are living longer, that means the volume of property coming on the market due to residents dying or going into care is dropping.

In effect we’re returning to the pre-Thatcher era when most people rented forever, and a few people owned.

I’ve no idea re interest rates, but my hunch is holding off buying in the expectation of significant price drops is a bad call. We bought a couple of months ago.

Obviously all housing markets are local, this is a big picture hunch, and I live in the SE so that could skew my view.

In terms of average salary, interest rates and average house prices, currently housing is pretty affordable by modern standards. Obviously the easiest leaver to pull there is interest rates and you could quite easily be back to unaffordable. when lending criteria slacken off a bit then sure as night follows day there will be another housing boom. Look at MrSmiths graph, doesn’t take a genius to forecast what happens after the blue like dips below the red line….

Prices have stagnated, they can only go up.

Unless interest rates rise & the 1,000,000 people that are already 3 months in arrears on their mortgage payments get reposessed. Such an influx of properties to the market means prices will only go one way. And that’s not up.

IMO prices will stagnate until wages increase to reduce the multiple, or they’ll fall to do the same. I certainly wouldn’t be maxing myself out on a mortgage.

Being at your maximum is never a good idea.

You can gamble that your salary will increase – how far along are you in your career.. are you even in a career?

There is little sense in renting if a mortgage will cost you the same or less.

Personally, I think in the long term we will see the relative gap between big and small houses decrease.

See MrSmith’s post above. Where do you think we are?

return to normal?

i’m waiting for the blow off phase

(hehehe he said blow off!)

It depends on circumstance, our repayment mortgage (we bought last year) is only 75% of our rent even though we’re now in a bigger place, so rent was costing us a lot. Rental cost relative to house prices vary hugely across the country.

I’m pretty sure we’re already in the “Fear” bit.
I’m looking at the moment, and only submitting “Fear” sized offers.

graphs like that make me laugh.
I’m sure ‘they’ were trotting out similar graphs in 2008 and saying we were at the ‘return’ phase.

mind you, I live in London and the market is very different to elsewhere in the country.

people talk about london prices going up but the figures are skewed by prime properties you see in the back of glossies left in the doctors waiting room. these are bought for cash by overseas investors looking for a safe haven not by your average working u.k. resident.
i have been looking at property in a few SE postcodes (not the cheapest areas but not the posh bits either (just the leafy areas that do latte’s and flat whites) for well over a year and the things i have noticed:
a steady stream of repossessions.
prices stay the same and then drop but remain unsold, property is still there a year later because it’s still overpriced and the seller is caught in a negative equity trap and in denial.
very little new property becomes available.
the only stuff that sells is realistically priced but the volume is tiny.

maxing out now would be asking for trouble, unless you are banking on inflation to erode your debt for you.

Twisting this slightly then, what about the idea of buying not-quite-the-ideal house under budget NOW, to take advantage of getting on the property ladder with low interest rates, and watching the market with a to maybe upsizing in 5 years depending on the situation, yet knowing if where at 7% interest by then we’d still be ok with the mortgage?

Is that more sensible?

^^ To me (and I fairly risk averse) your above suggestions sounds like a better one.
Buy a house that you can easily afford to make the repayments on. Make sure you get a mortgage you can overpay on, then spank as much money as you can on overpayments.

That is what we have done, although we live in a fairly cheap part of the country (as far as house prices go).

Double post

Although interest rates are historically low you may find that as a first time buyer the rates that are available to you aren’t that great. It depends on the size of your deposit.

You may find that in a couple of years you can get better rates because you have a larger deposit even if the base rate is higher

At the moment we are getting 3 years fixed at 3.3%, and five years at 4.75% in the mortgage quotes.

to take advantage of getting on the property ladder

is that the ladder that goes up, down, or one that’s horizontal and goes nowhere?

some light populist/alarmist reading for you:
http://www.dailymail.co.uk/money/news/article-2089295/The-horrifying-graph-shows-UKs-households-businesses-Government-hold-debt-nation-bar-Japan.html

just remember Debt=Wealth

Fixed rates for 5 yrs went up a few weeks ago.

am i completely off the mark in thinking that banks increase the interest rate on fixed interests because they’re expecting them to go up?

Kryton – we are also looking at first time buying at the moment. When I started a thread about this the other week I got a lot of warnings about the risks of getting into negative equity if house prices fall.

I am looking at it with very crude numbers but if we say buy and live there for 5 years it has to devalue by 5 years worth of rent to make it worth while not buying but renting? Or am I completely wrong with that?