Another anxious post-Brexit first time buyer

cashbackproblems

TrickyTree83 wrote: »

Because mortgages don't work like that do they!? Jeez..

If you need me to spell it out just ask.



Even if there are inflationary pressures, there will be equal opposite pressures to maintain growth in the economy. A recession would be worse than inflation, the two combined would be very bad. That is why the BoE will be fighting to keep the economy growing, the use of interest rates is their best tool to do that (as evident from the current historically low rate alongside QE post-2008). In terms of forecasting their approach no one really knows, I would bet that rates would stay the same or fall before putting even more pressure on consumers and as a consequence of that, the economy.



Yep, demand which is still there, it's not disappeared in a puff of smoke. So right now, right at this moment in time any games in the market with reduced offers are exactly about getting a bargain. If the predictions of a 20% fall in prices are correct I would expect to see people asking for a 20% reduction if they follow your thinking, they're not, because nothing would sell.

I put it to you that your position is the one that is laughable, and also extremely irresponsible on a board where people come for advice on how to go about making such large purchases.

"Fighting to keep the economy growing"?? You sound like a politician, all they can do is print money and control interest rates, they don't want to raise rates given how much debt the country is in.

Mortgages have nothing to do with liquidity in the economy, I was making the point people not get themselves into such large debts due to uncertainty and possible job cuts, this WILL cut demand and stop x5 mortgage deals. Banks already have tough affordability rules, with the new FCA responsible lending policy it will mean money wont be as easily available.

It has only been 5 days, people will ask for bigger reductions and this will get reported in the media more and the weeks and months go on. If you sell for 20% less and your next place is 20% less, you will sell as your in the same position. Also some people have no choice they have to sell

cashbackproblems

NewHomeOwner wrote: »

Also on the 10th May you said:
'Either way I don't see the economy crashing we will simply adapt our trading and legal obligations and think most things will stay the same. I feel the vote will be to remain, but will be voting to leave'

Just goes to show things change and none of us can predict the future

wow you have lots of time on your hands :rotfl:

well no one saw it coming, the economic situation has changed since I posted that in May, if I could predicted this I would be Darren Brown junior!

TibblesMittens

I hadn't expected so many responses - still very confused but at the very least it does help us think through it all, it is appreciated.

I won't get too deep into the debate either, I think truth be told we can't know, its a gamble. I don't want to mess our seller about, or get a quick buck - its just trying to minimise risk on a property we really do want.

It's in the interest of the buyers to maintain a stable if not increasing price. It may not look that way - but it is.

Its an unfortunate one as I think there's some truth that it's a self fulfilling prophesy - it's a classic collective action problem, it's our collective interest to keep the show on the road, but not in our individual interest if we don't believe others will do the same.

Will your morgage repayments, plus any service/management charges and likley maintenace costs be lower than your current rent?

How soondo you anticipate wanting to move on?

This is a good question - the monthly payment is the same as our rent currently. There's a £100 p/cm service charge on top of that - but we save £400 a month currently so we would hope to overpay the mortgage by at around £3000 per year for the reasons you mentioned. I know we can afford more but we're risk averse even in good times.

We're likely to move mid August - from what I've read there should be some data on prices in late July, but that probably won't be that representative, the August data will show if there's been a real/continuing downward trend. Like I say we don't want to mess the seller about either by waiting that long. Hence the question re timing. Then again, the later in the process, the stronger the negotiating position potentially?

BUT think of it as a home, not as an investment. If you are viewing it as an investment, think again, as it just got riskier.

Its very much a home - which is what's making this difficult, if this was a commercial property or similar we would definitely not be doing it - it's trying to weigh up the potential dip in the value, against the rental we'd pay in the meantime (£1150 pcm) plus the fact we actually want this place. Getting that first step on the ladder means a lot psychologically, just worried that could cloud our judgement too.

Constantly having to remind myself that we're in such a good position otherwise. What odd times.

NewHomeOwner_2

cashbackproblems wrote: »

wow you have lots of time on your hands :rotfl:

well no one saw it coming, the economic situation has changed since I posted that in May, if I could predicted this I would be Darren Brown junior!

This is the point. No one can predict what's going to happen. The economic situation has changed since May and probably will again and again over the next 2 years.

Let's see what happens and stop passing off our opinions and what we'd like to see happen as fact.

kilby_007

TrickyTree83 wrote: »

By advising to lower offers you're advocating a self-fulfilling prophecy because the only reason to lower the offer is to "get a bargain". These people may not realise that once they've purchased their "bargain", that the next house that sells in the same area as them has the same buyer taking the same approach chancing the price and the price for the whole area lowers even further. So if the original buyers wanted to sell their new acquisition they've lost out already because it won't go for what they bought it for.

It's in the interest of the buyers to maintain a stable if not increasing price. It may not look that way - but it is.

You understand that it is possible for house prices to fall, right? If you buy a house during a crash, of course other comparable houses will sell for less after you've bought yours, it's a given! I don't see your point?

You talk like a typical boomer. "It's in the interest of buyers". You do realise that house prices have been rising at several times that of inflation don't you? If house prices are outstripping wages year on year, it might be beneficial if you're on the housing ladder already, but what about the next generation(s)? There's three ways a housing market can operate:-

1) House prices rise at the same rate as inflation. Housing is affordable to the same group of people/salaries year on year.
2) House prices rise at several times the rate of inflation and then there is a "crash" cycle which corrects the market every x amount of years.
3) The rich buy all of the houses and everyone else rents, lining the rich's pockets further.

The property market has actually been through 1 (pre-70's) and is now deep into phase 2. Osborne et al have been propping up the market with cheap credit. The political & financial decisions over the coming months will dictate how quickly the next crash happens, but sure as the sun rises and sets, there WILL be a crash, and then the rich will buy more houses.... (3)

peter_we

Liquidity is still there, credit is still available

Maybe. I work for a small lender and our funding evaporated on Friday.

We have 5-year fixed term agreed

If you intend to stay for 5 years all this mess should have cleared up. It might be an idea to wait for a couple months to see how things go, they arent going up for two months no matter what.

My situation is that I have the Right to Buy and I have the option to buy at any point .. after August, based on a valuation that reflects market conditions.

£450K for a one bed flat before the discount, I have to get a 5 year fix, anything shorter and its too risky.

Crashy_Time

Blue22 wrote: »

A little anecdote for you. In 1989, a newly married friend bought her dream home with her new husband. It was a cute but small 2 bedroom new build (think box for the second bedroom) in the South East.

Prices dropped soon after but believing that the downturn wouldn't last much longer, they started a family and went on to have two children. By the mid 1990's my friend started to talk about being trapped and the house was totally unsuitable for two young children but with negative equity of 10 000s there was nothing the family could do.

I will spare you the details of the angst the family suffered over the next few years but if is suffice to say that the couple spent years hating their 'dream home'

It wasn't until 2001 that the house increased enough to pay off the remaining mortgage balance. They sold as soon as they could and moved into rented accommodation and they are still in private rented today.

So my advice to any FTB would be not to even think about buying unless you intend to stay put for at least a decade.

If you had posted that before Brexit it would have been laughed off the boards, but it is now very noticeable how many people have stopped to think about property values since the historic vote, even on the hidden forum where the Crazies post.

indianabones

Spoke to a small local estate agent today. He said currently they've got 20 properties under offer. Of the 20 he said only one had withdrawn the offer. It was a complete withdrawal and not a smaller offer before withdrawal. He said he was expecting a couple more to reduce offers or withdraw, but thinks that's more likely to happen after any changes to interest rates are made.

They cover the Handsworth/Handsworth Wood/Smethwick area of Birmingham.

So 1 drop out in 20 in 5 days. Still too early to make any judgements, so best to hold fire for the time being.

Blue22

hazyjo wrote: »

I bought for £65k in 1991 at what I thought was the bottom of the market. It kept falling. By 1995 it had dropped to £58,500 (when I sold).

So you weren't as unlucky as some as you waited until a drop to buy initially? Then if you were able to sell and go on to find the deposit for another house, you were either not a FTB, or you paid down a lot of capital in those 4 years, or you initially had a very large deposit?

My worry is for any young people who may be considering jumping in as a FTB with less than a 20% deposit and those stuck with the mindset that house buying is always a brilliant investment.

TrickyTree83

cashbackproblems wrote: »

"Fighting to keep the economy growing"?? You sound like a politician, all they can do is print money and control interest rates, they don't want to raise rates given how much debt the country is in.

Mortgages have nothing to do with liquidity in the economy, I was making the point people not get themselves into such large debts due to uncertainty and possible job cuts, this WILL cut demand and stop x5 mortgage deals. Banks already have tough affordability rules, with the new FCA responsible lending policy it will mean money wont be as easily available.

It has only been 5 days, people will ask for bigger reductions and this will get reported in the media more and the weeks and months go on. If you sell for 20% less and your next place is 20% less, you will sell as your in the same position. Also some people have no choice they have to sell

WOW.

Mortgages have nothing to do with liquidity or the availability of credit?

"Accounting liquidity measures the ease with which an individual or company can meet their financial obligations with the liquid assets available to them. There are several ratios that express accounting liquidity.

Read more: Liquidity Definition | Investopedia http://www.investopedia.com/terms/l/liquidity.asp#ixzz4CuhTJVdA
Follow us: Investopedia on Facebook"

And hate to break this to you, but climbing the housing ladder rarely means a step up is less than where you're coming from, even with a 20%, 30% drop.

Plus, again, that is not how mortgages work.

If you buy your first place for £100,000, 10% deposit, £90,000 mortgage (easy numbers), then 20% gets wiped off your value, you still owe the bank £90,000. So when you buy your next place, even if you were downsizing as you seem to suggest - where has your deposit gone? You'll not be able to buy. And if you want to step up, well that's even more of an unlikely situation.

With that in mind, keeping the housing market moving at reasonable (by recent standards) prices will be of benefit to everyone apart from first time buyers who apart from the already wealthy will be the only people who will gain from such a drop in the market. Most others will lose.