Should I Buy? BBC News sowing doubts

LondonFTB

Hi All,

I have been a lurker here for a few months, and find the chat on house related stuff interesting because I have wanted to get my own place for a few years now. Living in London, the prices have been difficult to say the least. I have managed to save a decent deposit now, and have had an offer accepted on a 2 bed flat in South London last week.

What is worrying me is a report I just saw on BBC news at Ten. Their economics guy was warning that interest rates are going up around the world, and were likely to go up here as well. He had a big graphics thing saying "interest rates up" and "house prices down". If it was on any other channel I would take it with a pinch of salt, but surely the beeb can be trusted?

Obviously for me this would be horrendous, as I would be losing my deposit money straight away if buy now. I am stretched enough as it is on the mortgage, and was going to have interest only for a while until my pay goes up and I can start repayments.

Do you think there is anything in this story, or should I stick to my guns and buy? I've wanted my own place for years, and I can't believe this comes up just as I am finally doing something about it.

Any advice greatly appreciated - it's hard enough to sleep in this heat without worrying about this stuff as well!

F_T_Buyer

I've been saying rates will go up and asset prices will fall for a while now. Where have you been?

LondonFTB

Ha! there are plenty of people who tell me not to worry, that prices always go up in the long run. Didn't someone else say we're all dead in the long run though? What I would give for a crystal ball right now!:rolleyes:

lightspeed

I believe that it is safe to say that in the not too distant future IR's will be increasing. This can have several impacts on the market:

1) People cant afford their mortgages and have to sell which may possibly lead to an influx of houses on the market, which in turn can cause prices to be lowered.

2) People cant borrow as much. As a result vendors have to lower prices to sell there homes.

Finally) The uncertainty of the makret may again lead to cuts in house prices to attract buyers.

You have got to remember that IR's are very low at the moment therefore people are borrowing large amounts without considering what effect IR increases may have.

You have made a sensible decision in seeking advice and should seek further advice (other than that on here) from a whole of the market broker. This will give you a clear insight into what you can and cant afford.

At the moment, what is happening in the market appears to be nothing more than speculation. Knowone can say for sure what impact IR increases may have on home owners. According to some, a 1% increase in IR's would be enough to send some people over the edge, and if this is true i would be interested to see how much they have borrowed in relation to their income for this to happen. If this would be the case for you, then now is not the right time to buy. However, if you can ride the storm that may come with 1, 2, 3 or even 4% increases then it may well be worth buying (i personally think rises above that are highly unlikely).

The fact is that knowone knows how high IR's will go. They have reached 15% in the past, but i dont think that rates would need to go that high to cause problems this time around. You can only make yourself aware of what might happen and be as best prepared as possible.

You need to ask yourself, are buying a home or buying as an investment? If its the latter then i dont think now is the best time, but if you are buying for a home then i think in the long term your money is relatively safe. Once you have bought a home, why worry about the deposit? The only time you will see it again is if you sell.

Good luck

dfarry

.Yes some very good advice there....I am looking to buy a home... but with that will be a large mortgage so I am concerned about interest rate increases. At the same time I have posted messages here about my frustration with the current over priced market and expectation of sellers (of which I am also one)....So to some extent I look at an interest rate increase as a stabilising factor (though sadly this will hit many very hard).My hope is that uncertainty over rate increases will over the next few weeks filter into the house market. I am already under offer on my home so clearly I want the best of both worlds - but I am hoping my offers on homes will now be more acceptable to sellers that my start to worry about not being able to sell in the wake of interest rate increases.

movieman

According to some, a 1% increase in IR's would be enough to send some people over the edge, and if this is true i would be interested to see how much they have borrowed in relation to their income for this to happen.

Remember, a 1% rise from 5% is a 20% increase in interest payments. If you've already gone for an interest-only mortgage because you can't afford a repayment mortgage, a 20% increase in mortgage costs could easily be the difference between surviving and bankruptcy.

mystic_trev

I have to say it's not looking good and very much seems to be going fairly much the way I predicted. 25bps increase in August and another before year end?

Where's meanmachine when you need him!

Jorgan_2

Some good advice on here, the only thing I would add is when you speak to a mortgage broker, ask them to calculate the repayments at a higher rate, say 1 or 1.5% higher than they are currently at. If you can't afford the payments at the higher rate, now probably isn't the right time to buy.

movieman

It's also worth noting that the fixed-rate mortgages on offer have been creeping up over the last few months even though the Bank of England have left rates static. The Japanese are busy sucking liquidity out of the global markets, and that's affecting everyone: they've been the 'lender of last resort' to the world for the last few years.

zar

Martin wrote a blog about this kind of thing yesterday.

wibble68_2

LondonFTB wrote:

What is worrying me is a report I just saw on BBC news at Ten. Their economics guy was warning that interest rates are going up around the world, and were likely to go up here as well. He had a big graphics thing saying "interest rates up" and "house prices down". If it was on any other channel I would take it with a pinch of salt, but surely the beeb can be trusted?

Normally the BBC are very positive about the housing market.

If house prices have a monthly fall the beeb will look to the annual HPI rate and report an increase.

I'm surprised they allowed this reporter to suggest that house prices could come down.

He'll be getting a visit from Kirsty and Phil no doubt.