Is this the right time to get on the property ladder?

dougy432

Hello All,

My wife and I are in the process of buying our first house together. We are in our early 40's and have both for various reasons, had the rough end of the property experience.

Looking at reports, aswell as a rise in the interest rates, the forecast for house prices suggests a fall of 20%!

On paper it now looks like we should pull out of the purchase and continue to rent for a couple of years.

Can we borrow a crystal ball please?

Regards

Dougy

dkmax_2

dougy432 wrote: »

Looking at reports, aswell as a rise in the interest rates, the forecast for house prices suggests a fall of 20%!

On paper it now looks like we should pull out of the purchase and continue to rent for a couple of years.

You don't need to be able to see into the future precisely but you do need to assess your ability to deal with the most plausible outcomes.
Use stress tests, assume someone loses a job, rates hit 10% etc. Can you ride out the inevitable stormy periods?

Consider:

• LTV - is negative equity a real risk?
• Negative equity is only a problem if you must sell or remortgage.
• Offset any estimated losses by taking into account how much rent you would have otherwise paid. Allow for costs of ownership.
• Are you able to sustain mortgage payments as the rates ratchet up ? Can you over pay during the good times?
• It can be less costly overall to buy an expensive house at a low rate now, than a cheaper house at a higher rate later.
• Tax and/or inflation will be eating your savings.

Running_Horse

Ask the house price forum.

They don't know any better than you, but will take 20 pages saying so.

If its the right time for you and your wife, its the right time.

If you need to ask the question, it may not be.

Thermidor

dougy432 wrote: »

Hello All,

My wife and I are in the process of buying our first house together. We are in our early 40's and have both for various reasons, had the rough end of the property experience.

Looking at reports, aswell as a rise in the interest rates, the forecast for house prices suggests a fall of 20%!

On paper it now looks like we should pull out of the purchase and continue to rent for a couple of years.

Can we borrow a crystal ball please?

Regards



Dougy

Don't trust forecasts - they never get it right, and that's including the professionals!

If you're already in your 40s you need to get cracking would be my advice. For the last 4 years some wishful thinkers have been hoping property will crash, often predicting crashes of 90%:rotfl:

It ain't gonna happen. Properties have NOT crashed, and they are now steadily rising.

It's up to you if you want to hang around, but most people who do that end up missing the boat and NEVER manage to catch the next one. Remember, too - you're buying a HOME and will be living in it for some years to come. Twenty years from now your property will be at least 6 times the value it is now; is it really worth sweating and waiting a measly 2 years 'in case' you save a couple of grand (which you probably won't) - when at the end of it you'll be richer by many thousands of pounds. A HUGE amount of money in comparison to what you're worrying over now.

poppysarah

Thermidor wrote: »

It ain't gonna happen. Properties have NOT crashed, and they are now steadily rising. .

Erm, and the economic climate is looking rosey?



To the OP: It's got to be a sound thing for you to do. Job security for you has to be taken into account.

How much have you saved? Is this the ideal home? Will you outgrow it quickly?

Davesnave

You do not give enough info about your financial situation, area and so on for a very detailed response. However, dkmax above has given a pretty reasoned reply.

You will find other posters, like Thermidor, let emotion and personal agenda cloud their responses. People have different interpretations of the word 'crash,' but when we sold in the sharp downturn of 2008, we had to take £50k (or roughly 18%) off the price to do it. Our buyers also had to reduce theirs by a similar proportion, so the main beneficiary was the first time buyer at the beginning of the chain, who was really in control of the whole thing. Good luck to them for driving a hard bargain!

You only get to be a first time buyer once, so use your current status wisely. We were keen to sell in order to rent & become cash buyers, envisaging further falls in the property market. Though these did continue in the first half of 2009, in many places the falls were not as deep or sustained as many pundits imagined, so we might have been caught out.

The area where we were looking hardest (not here where we bought) hasn't recovered since 2008. This is why knowing your area, and its likely economic prospects, is crucial.

GDB2222

dkmax wrote: »

Negative equity is only a problem if you must sell or remortgage.

To be frank, negative equity is a problem always - it's ofc more serious if you have to sell or re-mortgage. However, dkmax is absolutely right - think about risk reduction, as the future is unknowable.

A lot of people (me included) thought that UK property prices are in a bubble, but so far we've been proved wrong. Prices have gone down a bit, but the bubble hasn't popped. That's at least partly because interest rates are so very low - base rate at 0.5% for around 2 years now. Rates are due to rise a bit this year, but not so much as will put real pressure on house prices probably. Next year will be crunch time, depending on what the economy does.

To answer the OP's question I can't see house prices racing ahead for a while, and there is significant downside potential. OTOH, with oil, food and commodity prices all rising, maybe a house is a good thing to have as a hedge against inflation. My only piece of advice is to think about fixing the interest rate you pay for say 10 years, as that reduces risk a lot. You'll pay more now, but it will make you more secure financially.

CloudCuckooLand

If you budget for something you can afford when rates rise, and fix the mortgage for 5+ years, then I think now is not an awful time to buy.

Yes, prices could drop, some say 10% or 20%, over the next couple of years, but if you have fixed your mortgage for 5+ years then you won't need to remortgage until some of those drops have been recovered. And 5 years gives more time to have an effect with your repayments.

And depending on your location prices may not fall...

In your 40s, you do need to think about getting on with it, so you can have the place paid off by retirement and enjoy rent/mortgage free living...

zcrat41

OP - I think it depends on your situation. If you bought now but might want to move in a year or two then I would say don't buy. If however, you are buying a family home you intend to live in for 10+ years then I would say it doesn't matter what the ecomic situation is - you're buying a home not an investment.

Having said that, I would only do buy if I had 25% plus deposit and a very secure job.

Good luck

ZC

brit1234

Thermidor wrote: »

It ain't gonna happen. Properties have NOT crashed, and they are now steadily rising.

Wrong, prices nationally fell to 2004 price levels after 2007 peak. They started rising again abit with the giant stimulas package such as interest rates being slashed 0.5%, stamp duty holidays etc.

However they have now been falling for months and wiped out all the previous gains. With all the economic problems house prices are set to continual falling.

What you have to remember is banks have very limited money to lend as low interest rates don't encourage savers. Thus limited funds will stop prices rising and lead to falls back to traditional levels.

dougy432

Thank you all for your advice,

We seem to be leaning towards still buying. We are after a home not a money making commodity. We plan to stay put for at least 5 to 6 hrs as this when my son will no longer be a dependent as such.
As we are a fair way into the purchase, the rented house we are in is no longer available, so we will still have to move no matter what, and incure more costs.

We have discussed the potential for the rise in interest rates etc, and are in a position to be able to still "live" if it increases a % or so. All the banks & build societies are increasing their fixed rates, we have just missed a 2yr with HSBC was 4.99 yesterday, we phoned to go for it, but it has increased to 5.49 today. They have a tracker at 4.29%, so even with a 1% increase in int rate it's below the fixed, so now we are thinking which way to go with this.

Regards

Dougy