So The Bulls Keep Bleating On About FTB's

Pond321_2

I do not dispute that owning your own house is a better (long term) proposition than renting a house. However, I think that the key thing is timing ones entry in to the market.

Say, for example, you have £20K in the bank today and want to buy a house that costs £200K. That means you have a 10% deposit.

House prices are going down. Let’s, for the sake of argument, assume they will go down 10% this year.

This means that in a years time your £20K will now represent a 11.1% deposit. So you will get a better mortgage rate as you no longer fall in to the bucket of ‘only’ having a 10% deposit.

However, over the course of this year you will have paid 12 months ‘extra’ rent. Say £800 per month so £9,600 in total.

So, on the face of it, renting is higher cost.

But……. If you wait a year you will be paying £20K less for the house, £15K less in interest on the money you have borrowed and probably £2K or £3K less in interest overall as you are able to secure a better rate.

It is a no brainer for me.

The problem is, that as prices continue to drop, it will make more and more sense to hold off buying for another year. Which is what the banks and politicians are terrified of.

the.ciscokid

HAMISH_MCTAVISH wrote: »

Stating debt increases with house prices is blindingly obvious, and yet completely meaningless.

It in no way addresses any of the salient points in the overall debate regarding house prices.

<snip>

What, like house prices are too high, because there is too much unserviceable debt?... Thanks in no small part to reckless lending, too big to fail banks, and the worlds "best" bankers who simply must have a million pound bonus or they will go elsewhere.

System

Pond321 wrote: »

So you will get a better mortgage rate as you no longer fall in to the bucket of ‘only’ having a 10% deposit.

I can't say as I've seen any LTV deals for 11.1%.

ukcarper

Pond321 wrote: »

I do not dispute that owning your own house is a better (long term) proposition than renting a house. However, I think that the key thing is timing ones entry in to the market.

Say, for example, you have £20K in the bank today and want to buy a house that costs £200K. That means you have a 10% deposit.

House prices are going down. Let’s, for the sake of argument, assume they will go down 10% this year.

This means that in a years time your £20K will now represent a 11.1% deposit. So you will get a better mortgage rate as you no longer fall in to the bucket of ‘only’ having a 10% deposit.

However, over the course of this year you will have paid 12 months ‘extra’ rent. Say £800 per month so £9,600 in total.

So, on the face of it, renting is higher cost.

But……. If you wait a year you will be paying £20K less for the house, £15K less in interest on the money you have borrowed and probably £2K or £3K less in interest overall as you are able to secure a better rate.

It is a no brainer for me.

The problem is, that as prices continue to drop, it will make more and more sense to hold off buying for another year. Which is what the banks and politicians are terrified of.

What you say is true but you are relying on house prices dropping which may or may not happen it’s a risk either way and you pays or don’t your money and take your chance.

DervProf

Pond321 wrote: »

Say, for example, you have £20K in the bank today and want to buy a house that costs £200K. That means you have a 10% deposit.

House prices are going down. Let’s, for the sake of argument, assume they will go down 10% this year.

This means that in a years time your £20K will now represent a 11.1% deposit. So you will get a better mortgage rate as you no longer fall in to the bucket of ‘only’ having a 10% deposit.

In this example, I don't think the difference is going to be that great. I doubt an extra 1.1% deposit will bag a better mortgage deal, and the ~£20K higher mortgage probably won't be a deal breaker. The key for a FTB is to get a mortgage deal that doen't tie them in for too long, then after a couple of years shop around for a better long term deal. Obviously with interest rates set to only go in one direction, it's all a bit of a gamble - fixed rate for 5 years, or a 1-2 year deal then see what's available ?

I think the real difference that a ~10% drop in prices makes is the borrowing power of the FTBer. £140k mortgage requires salary of £35k @ 4 x salary. £120K mortgage only requires £30K. A £5K salary increase might not be so easy to find.

Percy1983

Pond321 wrote: »

I do not dispute that owning your own house is a better (long term) proposition than renting a house. However, I think that the key thing is timing ones entry in to the market.

Say, for example, you have £20K in the bank today and want to buy a house that costs £200K. That means you have a 10% deposit.

House prices are going down. Let’s, for the sake of argument, assume they will go down 10% this year.

This means that in a years time your £20K will now represent a 11.1% deposit. So you will get a better mortgage rate as you no longer fall in to the bucket of ‘only’ having a 10% deposit.

However, over the course of this year you will have paid 12 months ‘extra’ rent. Say £800 per month so £9,600 in total.

So, on the face of it, renting is higher cost.

But……. If you wait a year you will be paying £20K less for the house, £15K less in interest on the money you have borrowed and probably £2K or £3K less in interest overall as you are able to secure a better rate.

It is a no brainer for me.

The problem is, that as prices continue to drop, it will make more and more sense to hold off buying for another year. Which is what the banks and politicians are terrified of.

This is very true and when I come to buy if it is very clear things are on the way down I may hold off, but as it is now things look stable(ish) locally to which I would just jump in. With that is approx another 12 months for the deposit to be saved so a lot can change in that time.

Right now I would go for a 5 year fix just so I know exactly what is happening for the first 5 years, in that time we can get married and decorate and hopefully save some money.

geneer

Jimmy-p wrote: »

Silence from hamish,,,,must be truth hurts.

less than 20 posts in and you got him figured out.
Well done.

Jimmy-p_3

geneer wrote: »

less than 20 posts in and you got him figured out.
Well done.

Yip, spot a !!!!!!!!ter a mile away