First Time Buyer advice

We3

My partner and I are buying our first property together soon. We're 31, have a combined salary of £80k and have around £40k in savings.

We're looking at properties between £200,000 - £240,000 are are comfortable putting down a 15% deposit. We're concerned about the potential increases in interest rates though. If they go up to 6% we could be straddled with a mortgage payment of over £1100 a month in 3-4 years time.

Is there anything we can do safeguard against this other than putting down a larger deposit/buying a cheaper house? For example, would be eligible for better fixed mortgage rates in a couple of years time because our LTV ratio has gone down?

Any advice would be much appreciated!!

amnblog

These kind of concerns can be dealt with via your broker.

You have the option of fixing your mortgage rate for 5 years, or being more conservative with your purchase price - or both.

Thrugelmir

We3 wrote: »

If they go up to 6% we could be straddled with a mortgage payment of over £1100 a month in 3-4 years time.

People have short memories. In the lead up to the crash of 2008. BOE base averaged 6.5% for the previous 10 years. So 6% lending rates are still on the low side usng historical data. Hence some lenders already stress testing at 7%. As more than likely they'll reach this level and be even higher over a 25 year mortgage term.

We3

Thrugelmir wrote: »

People have short memories. In the lead up to the crash of 2008. BOE base averaged 6.5% for the previous 10 years. So 6% lending rates are still on the low side usng historical data. Hence some lenders already stress testing at 7%. As more than likely they'll reach this level and be even higher over a 25 year mortgage term.

Absolutely. So is there anything we can do combat this once we have the mortgage in place? Overpaying initially I suppose.

amnblog

Thrugelmir wrote: »

People have short memories. In the lead up to the crash of 2008. BOE base averaged 6.5% for the previous 10 years. So 6% lending rates are still on the low side usng historical data. Hence some lenders already stress testing at 7%. As more than likely they'll reach this level and be even higher over a 25 year mortgage term.

When I am down - you always cheer me up Thrug

Halloumi

Do you have significant monthly expenses other than the mortgage to contend with? You are only borrowing around 2.5 times your income at your maximum budget, which sounds very affordable to me.

My partner and I will have repayments over the £1100 mark at today's interest rates and we have a significantly lower combined income, but I have no major concerns about being able to make repayments (barring any major disasters).

kiddakidda

Halloumi wrote: »

Do you have significant monthly expenses other than the mortgage to contend with? You are only borrowing around 2.5 times your income at your maximum budget, which sounds very affordable to me.

My partner and I will have repayments over the £1100 mark at today's interest rates and we have a significantly lower combined income, but I have no major concerns about being able to make repayments (barring any major disasters).

Halloumi is spot on, 80k salary and concerns of £1100 per month:question:

Is there personal debts, cars, credit cards etc?

kiddakidda

We3 wrote: »

My partner and I are buying our first property together soon. We're 31, have a combined salary of £80k and have around £40k in savings.

We're looking at properties between £200,000 - £240,000 are are comfortable putting down a 15% deposit. We're concerned about the potential increases in interest rates though. If they go up to 6% we could be straddled with a mortgage payment of over £1100 a month in 3-4 years time.

Is there anything we can do safeguard against this other than putting down a larger deposit/buying a cheaper house? For example, would be eligible for better fixed mortgage rates in a couple of years time because our LTV ratio has gone down?

Any advice would be much appreciated!!

Even at today's high street rates for fixed rates (85% ltv) 2.8% - 3.6%, you would be looking at a mortgage payment about £1080 - £1160 for a 200k loan.

We3

Only major expenses are two car payments (£150 ish/month). No significant debt otherwise.

Reason we're concerned about a rising mortgage payment is that we're panning on starting a family very soon.

Fiveboy

After starting your family, how much will your household income be? Most mums I know don't really want to go back full-time or at all due to childcare costs saying it’s not worth it.



Consider all the expenses of having children Childcare costs and all the baby needs etc, we have a 12 weeks son and spent quite a lot already must be coming up to £2000 now (however we could of brought more second-hand items saving money).



Stress test yourself with higher interest rates, when they go up you will just have to adjust your lifestyle so you can service the debt, basically cut out non-essential bills like Sky, Takeaways, Dinners out, Holidays, Latest Gadgets etc.



We are going to buy when my partner returns to work she willbe going back 3 days a week but our childcare cost will be free as we are lucky nana and grandma will do this for us.

We will borrow between 3 to 4 times our new household income when my partner returns to work with a 30% deposit.



When I warned my friend about the risk of interest rate rises his reply was I will just increase the years until the cut-off point, these can reduce the monthly payments but the cost of the overall loan increases.