First-time Buyer fear - Will house prices crash??

RHemmings

desperadoV2 wrote:

If someone goes for Fixed rate mortgage for 5 years, do they have to worry about interest rates going up or down? House price crash wouldn't affect them if they are going to stay put, right?

My understanding is, if I do decide to go for mortgage, then I will go for 3 or 5 years fixed term mortgage. So if there is a house price crash, I will be safe paying the same fixed amount towards my mortgage.

Will my fixed term mortgage gets affected if I'm on a negative equity? It shouldn't, right?

Is my understanding correct?

But what if interest rates are 10% in three or five years time when your fixed term runs out?

RHemmings

albertross wrote:

I doubt it will be next month, maybe Nov/Dec/Jan.

If you want a house, and can afford it buy one. If you wait too long you will be priced out of the market. How long did it take you to save your deposit? How much did house prices go up in that period. Most if not all of that hard saving has been wasted, because you procrastinated.

Forget about house price crashes. You buy a car, it depreciates, you buy a TV it depreciates. Over the long term, a house appreciates. It is also a usefull place to sleep at night..

You say that people who wait too long will be priced out of the market. Are you suggesting that real house prices will never fall again? That seems a rather odd prediction given all the evidence we see, and the cyclical nature of the housing market.

Viz_2

wibble68 wrote:

This post suggests to me that housing market sentiment is still good.

As people like Viz believe they're making money on their home.

Viz, how do you plan to convert your gain in to cash and is your house the only property in the country that's going up?

The turning point will be when/if interest rates get to a certain level thus reducing affordability and eroding sentiment.

This is my first house, and the only property I have ever owned. I don't plan to cash in in any form. I bought the house to live-in until we either want to move or we outgrow it.
I very much doubt properties in my area are the only one's going up :rotfl: .
I understand the value may also go down. But as I said, I bought the house to live in, not wanting to make me rich.

If the interest rates go up a few % i'm in a position for it not to matter too much.
Hopefully house prices will come down slowly, I may be able to buy another .

manhattan

desperadoV2 wrote:

I know what I'm going to do. I'm going to wait for 7th Sep, the day BOE is going to announce whether interest rates are going up or staying unchanged.

The inflation is currently 2.4% and to bring the inflation down to the target of 2%, they have to raise the interest rate by another 0.25% and make it 5%

I will see what I can do after 7th september.

My instinct says, its going to go up by 0.25% making it 5%

What say you?

i hope it does go up.

jamminjamaica

albertross wrote:

I doubt it will be next month, maybe Nov/Dec/Jan.

If you want a house, and can afford it, buy one. Even if you decide to buy, it can take months to find one and complete. If you wait too long you will be priced out of the market. How long did it take you to save your deposit? How much did house prices go up in that period. Most if not all of that hard saving has been wasted, because you procrastinated.

Forget about house price crashes. You buy a car, it depreciates, you buy a TV it depreciates. Over the long term, a house appreciates. It is also a useful place to sleep at night..

i agree with you.

desperadoV2

RHemmings wrote:

But what if interest rates are 10% in three or five years time when your fixed term runs out?

:eek: I thought when you apply for a 3 or 5 year fixed mortgage, they tell you what the interest rate will be after 5 years.

For example: 5.04% Until Sept 2009. After that period it is 6.49%

Should I still be worried in this case?

desperadoV2

albertross wrote:

I doubt it will be next month, maybe Nov/Dec/Jan.

If you want a house, and can afford it, buy one. Even if you decide to buy, it can take months to find one and complete. If you wait too long you will be priced out of the market. How long did it take you to save your deposit? How much did house prices go up in that period. Most if not all of that hard saving has been wasted, because you procrastinated.

Forget about house price crashes. You buy a car, it depreciates, you buy a TV it depreciates. Over the long term, a house appreciates. It is also a useful place to sleep at night.., something you'll always need, so even if the crash happens, all the other prices will crash, so you will still have enough to move to another house.

That's a very valid point and I totally agree with you. But what will you feel if there was a house price crash and you lost 25% value of the house (which could be 1000s). Won't you feel, I should have researched alot about this.

That's what I'm looking for. A good market research. House price crashes doesn't happen overnight, does it? My understanding is, it doesnt. There will be signs, indications, comments, alarms, flashing red beacons before it takes a nose dive. That's what I'm looking for. Is there any hint of house price crashing?

I know it may happen after 2 years time. I can't do anything about it, if it happens after 2 years. But if I can see any hint of that happening in the next 3-6 months then I will be cautious and not do anything stupid. That's the reason behind this post. First step of my research. I'm still a long way away.

RHemmings

desperadoV2 wrote:

:eek: I thought when you apply for a 3 or 5 year fixed mortgage, they tell you what the interest rate will be after 5 years.

For example: 5.04% Until Sept 2009. After that period it is 6.49%

Should I still be worried in this case?

Ah, that's a mortgage fixed for the full term, with an introductory rate for the first few years. Many people take out mortgages fixed for a three years, that then revert to another floating rate, or one linked to the BOE base rate. These people are often at risk of trouble because they may not be able to afford the repayments, even if the less fixed rate they go onto is only a little bit higher than the introductory rate.

When these mortgages are described, they often use the current floating rate for descriptive purposes, but that rate could be quite different after the introductory period has finished.

desperadoV2

manhattan wrote:

i hope it does go up.

May I ask why you hope the interest rates will go up? Is it because it will help increase the savings interest rate?

RHemmings

Viz wrote:

This is my first house, and the only property I have ever owned. I don't plan to cash in in any form. I bought the house to live-in until we either want to move or we outgrow it.
I very much doubt properties in my area are the only one's going up :rotfl: .
I understand the value may also go down. But as I said, I bought the house to live in, not wanting to make me rich.

If the interest rates go up a few % i'm in a position for it not to matter too much.
Hopefully house prices will come down slowly, I may be able to buy another .

But did you buy the house hoping that it would make you poor? In my case, I'm part of a farmily in the parent role. If I throw away tens or hundreds of thousands of pounds by purchasing a house at the wrong time, or be forced to buy in a "not so good" area, then this may severely affect the quality of life I can provide my family. Remember that the amount you pay for a house is not only the original purchase price, but the purchase price plus the amount you pay in interest and other charges. It adds up to a lot of money, that could be used for other things.