Interest rate increase wrong time to buy?

lindseyh2

Hello I have been on here before, and got some very good advice

Myself and bf, were (not sure now) thinking of buying a house very soon, currently renting etc, we have £27 grand deposit, no debt but on low wage, good credit rating,

However! the interest rates have gone up and look like continue to do so, house crash yet again being talked about, bf is getting a bit of cold feet because of this, and thinks we should wait for a year or so, we arent buying to make money or anything, just want own place and can afford future rate rises should these occur unless go up to 20% or something stupid so wouldnt be planning to move or anything, but obviously its a worry and dont know what to do

I think if we wait house prices could go up even more and we would be stuffed to get anywhere, but if it crashes etc we would be stuffed also! house crash has been talked about for ages, is it likely, even it does we wouldnt be able to buy anyway because no one would sell possibly, my parents lived through the 90s and rode it out, but maybe they were just lucky

I know other people cant tell us what to do, but anybodys opinion who knows more than we do, would help please please please

Thank you

toonfish

No-one that I have seen in the industry press is predicting a house price fall, let alone crash. The general concencus is that prices will increase at 4-5% this year. Interest rates are still historically low, and you can expect one or two more rises this year in my opinion, but I don't think there will be more than that.

talksalot81

I have been making my decisions based on risk.

As toonfish says, most with an interest in the market refuse to acknowledge a crash as possible but sustained 4-5% growth. So there are 2 situations:

1) You buy. In my case, if the market crashed, I would be screwed. If it does as toonfish suggests, I am making a bit of profit.

2) You dont buy. In my case, this means I totally remove the risk posed by a crash and 'pay' for it by giving up the relatively small amount of profit.

So at the end of it I have to chose between whether to take the risk of losing everything and making a bit of profit or removing the risk entirely and sacrificing the profit. In my case, the answer is obvious.

mdb99jh

talksalot81 wrote:

You buy. In my case, if the market crashed, I would be screwed. If it does as toonfish suggests, I am making a bit of profit.

True if you are buying the house for the purposes of selling it on again for profit. A bit of negative equity shouldn't matter too much if you are going to live in the house long term though - it's only a problem if you want to sell the house. Assuming you are planning to live there for the medium term at least (>5 years?) and can afford mortgage payments if interest rates rise up to a possible 6.5-7%, then I don't see a problem. You could wait for a crash, but it may not happen for a while yet...

HTH

talksalot81

mdb99jh wrote:

True if you are buying the house for the purposes of selling it on again for profit. A bit of negative equity shouldn't matter too much if you are going to live in the house long term though - it's only a problem if you want to sell the house. Assuming you are planning to live there for the medium term at least (>5 years?) and can afford mortgage payments if interest rates rise up to a possible 6.5-7%, then I don't see a problem. You could wait for a crash, but it may not happen for a while yet...

HTH

Not quite.

If you find yourself in negative equity you will be unable to remortgage. That means you will be stuck with paying your lenders SVR which would be a total disaster because quite simply I couldnt afford the repayments (and I am sure I would not be alone).

toonfish

talksalot81 wrote:

Not quite.

If you find yourself in negative equity you will be unable to remortgage. That means you will be stuck with paying your lenders SVR which would be a total disaster because quite simply I couldnt afford the repayments (and I am sure I would not be alone).

your points are valid, but folk who chose not to buy 2 or 3 years ago as "the market was about to crash" are now those struggling to get on the ladder. Also, in some areas buying can be not much dearer than renting

Guy_Montag

One option is to buy on a long fixed rate, at least 10 years maybe as much as 25 years. That means you'll never be clobbered with IRs at 15%. It does limit you flexibility to move though.

Gillby1

There is no definite answer to your question, as no one can say with any certainty that there will/will not be a crash, so it really depends on your reasons for buying. Are you interested in purchasing a house with the intention of staying there for more than a couple of years?

My partner and I have just bought a house, and we're obviously hoping that prices don't go down drastically. But we accept that there is a risk involved in purchasing. It's worth it for us, as we can't wait to have our own home, and if we have to stay there for the long term we can't see that being a problem. We haven't stretched ourselves too far, despite being offered mortgages five or six times our income, and will be making overpayments from the very first mortgage payment. For us it is preferable to paying out £500 per month in rent. But it might not be the same for you!

Let us know what you decide to do x

surfcat

toonfish wrote:

No-one that I have seen in the industry press is predicting a house price fall, let alone crash. The general concencus is that prices will increase at 4-5% this year. Interest rates are still historically low, and you can expect one or two more rises this year in my opinion, but I don't think there will be more than that.

Do you not perhaps consider that if the industry press started mentioning a crash then it would already be well underway? Why on earth would they want to talk up a crash?

lisyloo

Why on earth would they want to talk up a crash?

One reason could be to stop (relatively) innocent First time buyers getting pulled into a hugely speculative asset bubble and being saddled with a huge mortgage for the rest of their lives, whilst globalisation is putting pressure on wages and inflation is low etc.

However the press are not a moral bunch.
Their aim is to sell papers rather than serve the public interest.

so more realistic answer is : To sell papers.

roswell

you could take that 27 grand deposit put it in a savings account paying 5 % with very little risk and hold out for a few months to see how rates go ... alternatively you can put that into a house and hope it doesnt become a negative 5 % .... id hold out a few months plus get a bit of interest.