120k Mortgage --> baby on the way.. advice

lisyloo

whilst that technically is correct you have to also take into account that whilst waiting for the correction in house prices you are renting so you have to factor that against the cost difference in mortgage

being pedantic you also need to included costs of maintenance (on the owning side)

also fact that buying now technically means your mortgage is finishing earlier so you have that time at end of mortgage with no mortgage/rental so cash can be ploughed into investments.

I agree with the essence of what you are saying.
However to have no cash available would mean that

rent = mortgage interest + capital repayment + maintenance

I personally don't think this is likely.
At the moment it is more likely that

rent = mortgage interest + maintenance

and capital repayment can be saved and invested, putting you in the same position.

I agree with the thory of your point, but in practice I think you rent is LOWER than a repayment mortgage with todays high prices (although it does depend on the size of house to a degree).

lisyloo

Also bear in mind that the costs of moving are MUCH lower in rented accomodation than in owned property.

This is difficult to quantify because a couple might not be able to forecast how many times they would move e.g. for job reasons.
However it is another factor to be considered.
Renting gives a lot of flexibility (which can also be a downside as well if you get kicked out).

Woby_Tide

I agree with the thory of your point, but in practice I think you rent is LOWER than a repayment mortgage with todays high prices (although it does depend on the size of house to a degree).

all fair points, it is a minefield I agree

though the comment about rent being cheaper than a mortgage, I'd have thought it would be opposite way ound in practice otherwise the concept of buy to let is a bit screwed if you can't regain your outlay, I appreciate that if you've owned the property for a while it's not a n issue but I always thought rent prices followed the general cost of a mortgage on a similar property (though having not rented for a while I could be way off)

yonk

Rents haven't gone up in line with prices. Investors have been accepting lower returns or financing less of the house cost via a mortgage. Some may even have been subsidising the income from the property because the capital growth is so strong and they have used cash from elsewhere (own house or other houses or savings).

Lenders tend to ask that the rent obtained is a multiplier of the mortgage payments - so it can be 1.2, 1.3 or 1.5 x the amount of the mortgage payment that is the rent required for a mortgage to be acceptable for them to lend on. This is to cover costs like maintenance, voids or service charges. And obviously if the mortgage interest rate goes up then the payments do too.

So rents really should be higher than the cost of a mortgage but in the market today aren't always.

lisyloo

Another factor to bear in mind when reading any survey from a lender or estate agent, is that they put whatever spin they want to at the time.

A little while ago they were all talking the market up because they want confidence to remain high.

They are currently all talking the market DOWN because they want to try and stop the bank of England putting interest rates up.

Rightmove even rushed out a survey last night showing prices heading downwards because they wanted to get it out before the BOE meeting to set interest rates.

Personally I think they are dreaming if they think that the BOE will take any notice but nevertheless they are all trying.
So at the moment bear in mind that some parties are deliberately talking the market down and putting negative spin on the figures.

emma_b_4

we are a young couple who bought our home 2years ago, in sept, and at that time we had loads of people saying dont do it dont do it the prices will drop soon

hmmmmmmmmmm 2years later and the prices havent dropped, all our friends who were bleating on about renting and how much better off the
y were are now stuck in a renting rut..all ££going on rent no spare ££ to save up for deposit etc..and guess what they are still waiting for the prices to drop, fair enough they well might but i sure am glad i bought and didnt pay some1 elses mprtgage for 2years!! our house price had DOUBLED and even if the prices do drop i doubt they will go very low

i would say do what u want to do, you are paying the bills at the end of the day. work out a budget, stick to it and get the best deal for the price

it seems everyone has an opinion on the housing market!!! (yep even me!)

good luck and congratulations on the baby ;D ;D ;D ;D whatever you do be happy ;D

CurryKing_2

lisyloo - i've read many of your posts on various threads on this website and i largely agree with you. I have a baby on the way also and am looking for a property but have decide to rent for the next 6 months to see how the market pans out.

May i ask just out of curiosity what you do for a living? actually i'll rephrase that - why is your knowledge of the housing market so extensive? (damn sight better than mine!!!)

regards,

Neil

lisyloo

May i ask just out of curiosity what you do for a living? actually i'll rephrase that - why is your knowledge of the housing market so extensive?

Hi - I work in IT in the telcoms industry.
I am a software developer and have worked in that industry for quite a while.

I take a keen interest in financial matters and over the last 18 months have taken a particular interest in the housing market.
One of the places I look is the The Motley fool board - property markets and trends. There are a lot of people in the industry there or who work in the city and it links to a lot of news reports as well.

One of the reasons I have taken a keen interest is that I bought a house at the end of 2002.
I was very worried about it at the time but my husband and I decided to go ahead for a number of reasons, mainly that the property is our dream home, but also a quality property (good location, close to railway station, motorway, 2 good schools, great views etc).
I was very nervous about it but we have been lucky because the housing market has continued to boom since then.

However I do now feel that things have really gone far enough.
First time buyer levels are now down to 12% and it's only a matter of time before buy-to-let stops supporting the market. Rental yields are very low and for people buying for rental now, there is not much extra after covering the mortgage.
I don't see that this is sustainable.

The big question is how will it all unravel.

A very quick summary of the arguments is
1) It will crash because that's what it always does historically. Sentiment will change and people won't want to buy a falling asset.
2) It will gradually slow down because the market is supported by low unemployment and low interest rates.

After reading every article under the sun I have no idea which it will be.

However I still believe that the downside risk (property prices falling)  is much higher than any upside risk ((prices rising). So I feel at the moment it's not a good idea to buy a property and there is very little to loose as prices are unlikely to rise much higher.
There are starting to be signs that the market is turning.

CurryKing_2

Cheers Chick

Woby_Tide

Just a quick update on Lisyloo's comments and her sig, the MPC have started rethinking now over interest rates as they've taken effect quite quickly, article available here that goes through some of the current issues concerning future for interest rates and also about potential downturn on property prices

http://politics.guardian.co.uk/economics/comment/0,11268,1284073,00.html