FTB: How much % under to offer?

JenniferMcConnell

depending on what the builder says, I think I’m offering £480. We’ll see...

jimbog

I think that is a great house and a great location. Hope things work out well for you

numbercruncher8

I agree with that offer.

One thing that few people seem to want to pick up on is that asking prices can be unrealistic in the first place.

I see a nice place there, but a lot of work required to make it a final family home. Much of the downstairs space to the side is only accessed through the garage, it seems. May be that the lean-to/sun room have to go altogether, not the greatest in winter.
The kitchen isn't that family friendly and it'd be great to open all the downstairs up into one space. There isn't much point in a shower downstairs, IMO.
Upstairs, I reckon the bathroom is a bit small and the master needs an ensuite. Not sure if it's possible to get that and keep 4 beds.

Looking at what's sold, this went for £610k in November. Sure it's semi-detached vs detached, but in this case I far prefer that for value on the account of much better space inside and a far larger garden. If anyone goes in at £550k I think they'd be hard pressed to recreate a better house than that one unless they are doing the work themselves.

dani17

JenniferMcConnell said:

@Competsoph yes I wondered the same thing! From what I hear, 1.86% isn’t too bad and it’s better to secure that low rate for as long as possible. Unless I have that completely wrong?

Because market thinks that rate will not go up in the next few years and there is possibility that BOE rate go negative in the next meeting. I think that you should have a 15% deposit to get the rate of 1.86% for 5 years. with the same deposit you can get a rate of 1.49% for to years which make a difference of 0.37%. knowing that you have a large mortgage this may cost you around 6500£ more of interest rate during 5 years. I personally think that rates will drop more in the coming months. so the difference may be even bigger than 6500£. Now the good thing with the 5 years fixed rates is that it will protect you from being stuck in negative equity in 2 years. 

daivid

dani17 said:

JenniferMcConnell said:

@Competsoph yes I wondered the same thing! From what I hear, 1.86% isn’t too bad and it’s better to secure that low rate for as long as possible. Unless I have that completely wrong?

Because market thinks that rate will not go up in the next few years and there is possibility that BOE rate go negative in the next meeting. I think that you should have a 15% deposit to get the rate of 1.86% for 5 years. with the same deposit you can get a rate of 1.49% for to years which make a difference of 0.37%. knowing that you have a large mortgage this may cost you around 6500£ more of interest rate during 5 years. I personally think that rates will drop more in the coming months. so the difference may be even bigger than 6500£. Now the good thing with the 5 years fixed rates is that it will protect you from being stuck in negative equity in 2 years. 

 
Don't forget to get the best rate in 2 years you may need to pay fees, and if your house price has dropped or circumstances changed (employment/childcare/another child...) it may be difficult if not impossible to get another good rate. A tracker is likely to be the cheapest, but fixes offer security. 5 years at a very good (historically) rate that you know you can afford and will hopefully be long enough to ride out the impacts of the current situation and get you to a favourable LTV will suit many. 2 years as said will be cheaper than 5 IF you can get another good deal each time the 2 years is up and like the OP savings will exceed fees to re-mortgage.

Which 'makes sense' depends on the circumstances of the homeowner. Statements like '5 year fixes make no sense' are unhelpful (not made in the post I'm replying to I know) to say the least. Lastly even if the BOE rate goes negative why would mortgage rates fall further? Lenders will not pay you to take their money, the base rate is effectively 0 and fixes have crept up very slighlty, we have already seen the lowest rates for fixes.

edward2113

dani17 said:

JenniferMcConnell said:

@Competsoph yes I wondered the same thing! From what I hear, 1.86% isn’t too bad and it’s better to secure that low rate for as long as possible. Unless I have that completely wrong?

Because market thinks that rate will not go up in the next few years and there is possibility that BOE rate go negative in the next meeting. I think that you should have a 15% deposit to get the rate of 1.86% for 5 years. with the same deposit you can get a rate of 1.49% for to years which make a difference of 0.37%. knowing that you have a large mortgage this may cost you around 6500£ more of interest rate during 5 years. I personally think that rates will drop more in the coming months. so the difference may be even bigger than 6500£. Now the good thing with the 5 years fixed rates is that it will protect you from being stuck in negative equity in 2 years. 

Couldn't have said it better. Taking a 5 year fixed mortgage now = safer, but definitely losing quite a bit of money on interest. Taking a 2 year fixed mortgage = getting a much better interest rate, but risk going into negative equity when you need to remortgage. Again, it all boils down to risk vs money - you have to pick one. 

MobileSaver

edward2113 said:

Taking a 5 year fixed mortgage now = safer, but definitely losing quite a bit of money on interest.

This is simply not true. No-one knows what the interest rates will be in 2 years time (and again 2 years after that) so you cannot possibly say anyone will definitely lose money, especially when you consider there would probably be two extra £1000 setup fees over the five year period if going for two year deals instead of a five year.

edward2113

 Lastly even if the BOE rate goes negative why would mortgage rates fall further? Lenders will not pay you to take their money, the base rate is effectively 0 and fixes have crept up very slighlty, we have already seen the lowest rates for fixes.

While clearly you will not be paid to borrow money from the bank, negative interest rates will still obviously impact mortgage pricing. If BOE rates turn negative, this means that banks will have to pay interest on excess balances held at the central bank and the rates on their investment portfolios will also take a hit. This further increases the incentive for banks to lend out funds and with consumer and SME lending taking a hit due to COVID, given the risky nature of such lending, banks could pile in on the mortgage market leading to rate reduction. 

To all the comments suggesting that mortgage rates may go up in the next few years, do you honestly see BOE base rate doing anything else other than staying flat or going down with the fallout of the pandemic still unclear and Brexit also looming over the economy?

eidand

my own view is that 5 years fix is the better option to be honest. I will be buying soon and definitely going for that.  A little bit of extra security is always good, plus who wants to pay massive fees every 2 years to remortgage / fix again etc.

Crashy_Time

The economic conditions that lead to any BOE negative rate scenario will be very bad for the value of any purchase made now going forward. Low rates (beyond a certain level) are nothing to cheer about, and certainly won`t be passed on in full to those with mortgage debt (IMO)