Interest rate increase wrong time to buy?

MickKnipfler

talksalot81 wrote:

This may well be the case for someone with significant equity in the property but it is nowhere near a simple if that is not the case. For anyone with a 100% mortgage they will suddently find themselves in negative equity which means they cannot move, they cannot remortgage (thus repayments could become enormous) and are basically stuck. The only way out is to sell or be reposessed - neither of which is beneficial!

At least inflation is rising which will help to erode the debt.

It's always a difficult decision but personally, I wouldn't dream of buying a property right now

fivemice

"It's always a difficult decision but personally, I wouldn't dream of buying a property right now"

How many years have people been saying that?

Snow_Dog

On certain unnamed sites about 4 or 5 years.

talksalot81

fivemice wrote:

How many years have people been saying that?

How about this one:

House prices always rise.

mk1mini

talksalot81 wrote:

This may well be the case for someone with significant equity in the property but it is nowhere near a simple if that is not the case. For anyone with a 100% mortgage they will suddently find themselves in negative equity which means they cannot move, they cannot remortgage (thus repayments could become enormous) and are basically stuck. The only way out is to sell or be reposessed - neither of which is beneficial!

I appreciate your point, but we are not talking about a 100% mortgage here. If you are prepared to live to your means you will be ok (i.e. dont buy a house that you cant or is to risky to afford?

fivemice

talksalot81 wrote:

How about this one:

House prices always rise.

Not quite sure I understand your point as that is clearly not true.

talksalot81

fivemice wrote:

Not quite sure I understand your point as that is clearly not true.

My point is that a great many people have been saying it for a long time. It is similar to people saying that 'now is a bad time to buy'.

talksalot81

mk1mini wrote:

I appreciate your point, but we are not talking about a 100% mortgage here. If you are prepared to live to your means you will be ok (i.e. dont buy a house that you cant or is to risky to afford?

Sorry I was being general - you are quite right that in the case highlighted by the poster, NE shouldnt be a huge concern (although not one you can totally neglect!). This of course very much balances on the choice of mortgage and what the rates do. On a low income, there is alot less breathing space for rises.

My situation is really similar except that I would be lucky enough to have quite a high income. If I dont buy and the market continues as it currently is, then I simply cannot afford a house (although I know this is not a 'never'). In effect I lose a bit of money by not 'investing', but at the end of it, I still have my earning potential, I have more than enough money to rent and live comfortably. On the other hand, if I buy I might make a bit of a profit through market rises but the important points are that my years of hard savings could be wiped out, rates rises could hammer my monthly payments, uncertain future for my employment could totally wreck my ability to pay (and my partner could not cover on here own), the cost would also immediately disable us from affording children without a significant pay rise for me... basically a crash would have us up smelly creek.

So to me I am balancing between not buying and being basically safe or buying and in fact risking major loss.

MickKnipfler

fivemice wrote:

"It's always a difficult decision but personally, I wouldn't dream of buying a property right now"

How many years have people been saying that?

I agree. I had a BTL that I bought in 1999 and sold in 2002 for 100% profit. Should I have hung on? With hindsight - probably. Was I wrong in believing property prices couldn't raise much further? - In the short time, you may argue I was. However, what's happened since, doesn't convince me I was wrong, just that my timing was out and that now a "substantial cooling off" is even more likely and that the consequences will be even worse.

I smelt gas in 2002. What's happened since is truly remarkable.

ollyshaw

toonfish wrote:

Conversely if they were expecting house prices to crash would they be increasing their lending multiples, and bending over backwards to lend. Prices may well "crash", personally I doubt it, but my main point is that the same thing has been predicted for a few years now.

Really, surely they have to make sure that they get the money back?

Also just because a crash has been muted for a while and hasn't happened does not mean we are not approaching a crash (doesn't mean there will be a crash either).

Olly