Is it reasonable for us to drop our asking price given current climate?

MobileSaver

colink24 said:

yet some people still think the world is the same prior to COVID-19.

I don't think anyone thinks the world will be the same post-Covid-19 but at the same time no sane, rational people think there will be a magic 20% to 30% blanket reduction in house prices due to Covid-19; yet some people on here seem to think just that... go figure!

colink24

MobileSaver said:

colink24 said:

yet some people still think the world is the same prior to COVID-19.

I don't think anyone thinks the world will be the same post-Covid-19 but at the same time no sane, rational people think there will be a magic 20% to 30% blanket reduction in house prices due to Covid-19; yet some people on here seem to think just that... go figure!

Certainly not blanket but we paid £142,000 for a one bed starter in late 2007. Early 2008 value was £108,000 (same property across from me sold). It certainly is not guaranteed that we wont see a crash like this, is it? And that was South East England, where prices are generally solid.

ichicc

I posted this in another thread but looks like that one was deleted...

I am a first time buyer with an offer and mortgage agreed before this whole pandemic started. I keep seeing posters in these threads saying that it doesn't matter if prices fall as long as I'm not looking to sell in the near future.

However, surely it does matter for those (i.e. many FTBs) on relatively high LTVs (say 80%+) where the mortgage is a 2-year fixed rate. My concern is that in 2 years' time my house valuation could be significantly lower than when my mortgage was agreed. So when we come to remortgage we could quite plausibly be facing a drop in our home equity and hence higher interest rates due to being in a higher LTV band. Or worse, we could not be able to remortgage at all (e.g. if banks were derisking or if we hit negative equity). Then we'd be stuck on the SVR which at the moment is like 3.6%.

Is my understanding of this risk correct? Because if so it seems somewhat misleading to say price drops don't affect me if I don't aim to sell.

MobileSaver

colink24 said:

Certainly not blanket

Some posters here think every property in the UK will instantly drop by 20%+ overnight judging from their posts.

colink24 said:

we paid £142,000 for a one bed starter in late 2007.  It certainly is not guaranteed that we wont see a crash like this, is it?

Of course there's no guarantee there won't be a crash but similarly there's no guarantee there will be a crash either! What I can say with certainty is that even if prices do drop the same then last time it took around 18 months to drop 20% from their peak so anyone thinking prices will be 20% less any time soon really is living in a fantasy world.

As it happens I also bought a house in late 2007 (for just over £200k) and later sold it for a 10% profit.

Unicorn_cottage

colink24 said:

MobileSaver said:

colink24 said:

yet some people still think the world is the same prior to COVID-19.

I don't think anyone thinks the world will be the same post-Covid-19 but at the same time no sane, rational people think there will be a magic 20% to 30% blanket reduction in house prices due to Covid-19; yet some people on here seem to think just that... go figure!

Certainly not blanket but we paid £142,000 for a one bed starter in late 2007. Early 2008 value was £108,000 (same property across from me sold). It certainly is not guaranteed that we wont see a crash like this, is it? And that was South East England, where prices are generally solid.

@colink24 Are you still in the house? It yes what is it worth now? If no what did you sell it for and when?

MobileSaver

ichicc said:

My concern is that in 2 years' time my house valuation could be significantly lower than when my mortgage was agreed.

Lots of "ifs" in your post and an SVR should be easily affordable for you as the bank will have stress tested you at a higher amount than that anyway. Many of us old timers on this forum were paying over 10% on our mortgages at one point so 3.6% is hardly the end of the world.

If you are genuinely concerned then why not fix for 5 years or longer? Or if you are seriously risk averse then just keep paying a landlord's mortgage instead of your own and let the landlord take all the risk? (and of course let the landlord take all the profit )

JammyMatt

MobileSaver said:

ichicc said:

My concern is that in 2 years' time my house valuation could be significantly lower than when my mortgage was agreed.

Or if you are seriously risk averse then just keep paying a landlord's mortgage instead of your own and let the landlord take all the risk? (and of course let the landlord take all the profit )

Or all the losses!

I don't think you need to be "seriously risk averse" to view the current forecasts from most financial bodies and even estate agents as a cause for concern, and a good reason to pause the biggest purchase of a FTBs lifetime.

Maybe if you're a established landlord that has the equity and capital to swallow a loss on a house, or ride out any falls then fine. But most FTB don't, and if prices do fall and they then lose their job during what looks to be the worst global recession probably in their lifetime, i don't see how that is a risk worth taking.

Personally, I would wait 12 months, but i guess i'm seriously risk averse 

ichicc

MobileSaver said:

ichicc said:

My concern is that in 2 years' time my house valuation could be significantly lower than when my mortgage was agreed.

Lots of "ifs" in your post and an SVR should be easily affordable for you as the bank will have stress tested you at a higher amount than that anyway. Many of us old timers on this forum were paying over 10% on our mortgages at one point so 3.6% is hardly the end of the world.

If you are genuinely concerned then why not fix for 5 years or longer? Or if you are seriously risk averse then just keep paying a landlord's mortgage instead of your own and let the landlord take all the risk? (and of course let the landlord take all the profit )

Not really a question of whether it is affordable (it is provided we both stay employed) but more one of wanting to avoid paying an unnecessary cost. We'd be paying £800 extra per month at the SVR compared to our agreed fix!

Thankfully our "landlord" as it stands is my parents so not overly concerned about your second point.

Seeing if we can get our lender to transfer us onto a 5-year deal is definitely something we are considering, although unfortunately their 5-year rate is much less appealing than their 2-year one.

At the moment we are leaning towards renegotiating. Then there'd be a lower probability of our worst-case outcome at least, since we'd be buying at a lower valuation to start with. We do really love the property but would probably be able to suck up walking away from the table if need be and revisiting the market in 12 months.

colink24

Unicorn_cottage said:

colink24 said:

MobileSaver said:

colink24 said:

yet some people still think the world is the same prior to COVID-19.

I don't think anyone thinks the world will be the same post-Covid-19 but at the same time no sane, rational people think there will be a magic 20% to 30% blanket reduction in house prices due to Covid-19; yet some people on here seem to think just that... go figure!

Certainly not blanket but we paid £142,000 for a one bed starter in late 2007. Early 2008 value was £108,000 (same property across from me sold). It certainly is not guaranteed that we wont see a crash like this, is it? And that was South East England, where prices are generally solid.

@colink24 Are you still in the house? It yes what is it worth now? If no what did you sell it for and when?

No, I moved out in Sept 2015. I sold it for £156,000. I think its around £200k now (or was prior to Covid).

Unicorn_cottage

colink24 said:

Unicorn_cottage said:

colink24 said:

MobileSaver said:

colink24 said:

yet some people still think the world is the same prior to COVID-19.

I don't think anyone thinks the world will be the same post-Covid-19 but at the same time no sane, rational people think there will be a magic 20% to 30% blanket reduction in house prices due to Covid-19; yet some people on here seem to think just that... go figure!

Certainly not blanket but we paid £142,000 for a one bed starter in late 2007. Early 2008 value was £108,000 (same property across from me sold). It certainly is not guaranteed that we wont see a crash like this, is it? And that was South East England, where prices are generally solid.

@colink24 Are you still in the house? It yes what is it worth now? If no what did you sell it for and when?

No, I moved out in Sept 2015. I sold it for £156,000. I think its around £200k now (or was prior to Covid).

So not all doom and gloom