New buyer nerves

Toad

Hello all,

We're a young (ahem) couple with a 2 year old daughter and we find that we could be in a position to buy in the next 12 months or so.
But we're nervous.

With an income of 39k (she's full time mum and doing a great job of it!) we pay £650/month rent and are debt free. But we also have my wife's family in Ukraine so we need to visit there every 2 years at least so must factor around £1000+ per trip into our budgeting.

We've been considering houses around 130-140k with 10% deposit. Something modest but still with a decent garden. We've actually found some really nice homes in this range and even a little lower (that need a little work). This would be affordable now, but, in 5 years if the rates rise then even with only a 5 or 6% mortgage interest rate the repayments increase rapidly.

This is what we've found:
For a first time buyer with 10% deposit, the starting rates appear to be anything from 3.79 to 5.25%. After 2 years (or whichever introductory period) these go up to between 4.8 and 5.2%

If we were to manage to keep on the lowest rate each time (and conveniently forget early repayment fees, arrangement fees and the like) then we're looking at:

130k mortgage after deposit
£678/m @ 3.79%
£784/m @ 5.2%

If rates go up to 6% in a few years we're looking at £847 ! (I guess we'd have to take in a lodger)

If we get to the rates of the 1980s then even for what is a 'budget' level house today would result in roughly 1675/month!

Of course, we can add to all this the buildings insurance which I'm sure is going to be compulsory, the cost of maintenance. If the gas boiler blows up, we'd be looking, I'd imagine, at over £1000 for a replacement, and that's not something one could wait for if it went in winter.

So with all this, we examined our motivations for buying rather than just staying 'safe' renting. Most importantly, we want somewhere to call our own as a long term home. We're not looking for a quick return investment (isn't that why the market is in such a mess anyway?) but something that would give us a bit of a pension later in life would be welcome. We want to be able to decorate and make alterations without asking permission and increasing the value of somebody else's property. For example, we'd love to put in a corner bath here, but then the landlord will say 'thank you, goodbye'.
Not to mention being at the landlords mercy when it comes to waiting for minor repairs. (11 months for a placement light switch!)

We have seriously considered leaving the country where house prices are a lot more sensible (Portugal, Czech Republic, Poland) but although I work from home via the internet, my boss seems to think that 2000 miles is different to 20 miles - so much for embracing the technology!

Anyway, that's our story. We'd love to hear your stories or experiences, or even advice.

Do we think the interest rates are likely to rise to 1980's levels? I'd imagine that with just how high house prices have got that it would result in a meltdown like the world has never seen. Nonetheless, that's in the back of our minds.

Thanks all,
Tony

ACG

Dont forget by the time interest rates go up your mortgage would be lower and hopeful your income would be higher. Your child(ren) may also be at school then which could mean your wife could go to work even part time.

I personally cant see interest rates going upto 80s levels for the forseable future. The country is on its !!! as it is. If interest rates went up that high pretty much everyone would be homeless and rent would also increase.