What happens to your credit rating if you decide not to go ahead with house purchase?

AdrianC

Carrot007 said:
Should they be mocked? No.

Did I? No.

Remember the dizzy days of self-cert mortgages, and LtV up to 125%...? That sort of thing was predicated on, and only ever going to work with, massive sustained price increases.

THAT's how your "40-50% negative equity" comes about. By being in 25% negative equity the day after completion...

GDB2222

FtbDreaming said:

@GDB2222 I don’t understand people that have ended up in such a massive negative Equity situation that they can barely afford the interest unless they bought a house that was way beyond their means anyway. People are renting paying £1000 a month and never getting a penny back surely a mortgage will eventually get lower as a pp said.

As Which? magazine  put it:
"Standard variable rates tend to be higher than the rates on other types of mortgage. For example, when we checked in January 2019, the average SVR was 4.9% according to Moneyfacts, while the average two-year fixed-rate deal cost just 2.52%."

So, negative equity means you're stuck paying interest that's almost twice as much as the usual two-year deals. 

Comparing rent of £1k per month depends on how much the mortgage is. If the SVR interest rate is 4.9% then £1k per month in interest is enough to support a mortgage of around £245k. But you'll also need to find money to pay for insurance and maintenance. 

" surely a mortgage will eventually get lower " - yes it will, provided you can afford to pay off part of the mortgage capital.

DCFC79

Dont get too fixated on your rating as lenders dont see that, your history is seen by lenders.

FtbDreaming

GDB2222 said:

FtbDreaming said:

@GDB2222 I don’t understand people that have ended up in such a massive negative Equity situation that they can barely afford the interest unless they bought a house that was way beyond their means anyway. People are renting paying £1000 a month and never getting a penny back surely a mortgage will eventually get lower as a pp said.

As Which? magazine  put it:
"Standard variable rates tend to be higher than the rates on other types of mortgage. For example, when we checked in January 2019, the average SVR was 4.9% according to Moneyfacts, while the average two-year fixed-rate deal cost just 2.52%."

So, negative equity means you're stuck paying interest that's almost twice as much as the usual two-year deals. 

Comparing rent of £1k per month depends on how much the mortgage is. If the SVR interest rate is 4.9% then £1k per month in interest is enough to support a mortgage of around £245k. But you'll also need to find money to pay for insurance and maintenance. 

" surely a mortgage will eventually get lower " - yes it will, provided you can afford to pay off part of the mortgage capital.

And thats why people shouldn't go buying £245k houses when they cant easily afford £1000+ a month. Im lucky enough to live up north so a £245k house would be especially nice. If I were down south a house purchase just wouldn't be happening! 

People who moan about the negative equity post 2008... i bet they were loving life in the years prior spending money they didn't have from their 125% mortgages then we’re supposed to feel bad that they have to pay it back. 

GDB2222

Would the rent really be as much as £1k pm up North if the house is worth say £100k?

In London, a one-bed flat can easily cost £250k. People are paying well over this with HTB. Once the new sheen has worn off these flats, they tend to fall significantly in value relative to the surrounding area.  So, unless there's a lot of house price increases generally, there are going to be some negative equity problems.

VE

Hi all, 

Many thanks for your guidance and opinions. It really helps analysing the problem looking at it from so many different perspectives.
We haven't made any decision yet, we are just trying to prepare for when that time comes - assuming everyone else in this relatively small chain is also still interested in proceeding.
Knowing that our credit rating won't be affected by a possible change of position is very good to know.
As some mentioned, when buying a home rather than investing on property the issue with negative equity is more related to the mortgage conditions rather than the possibility of losing a lot of money on a sale. This would be our case, and we still feel like we should take this in consideration, even if we have negotiated a 5 year fixed rate mortgage (for better or worse, since we have no idea how things will be in 5 years - hopefully we will all be past this by then). 

Many thanks and I hope you all keep safe!