House buying risks

Keswick1uk

It's not. That's just evidence it doesn't always go one way.

It's based on my belief that house prices are high now due to interest being exceptionally low. If interest rates rise substantially it will have an effect also on prices and potentially leave owners buying now in a position of a double whammy.

Keswick1uk

But I'm looking for alternate views (or agreement) or other ideas...like the lodger one. Should things pan out badlt

Crashy_Time

Keswick1uk said:

But I'm looking for alternate views (or agreement) or other ideas...like the lodger one. Should things pan out badlt

If things pan out bad less people will be looking for rooms to rent or you could end up with someone refusing to move out quoting legal rights etc. and not paying if they lose a job or something, in general lodgers are not a great idea IMO. Best bet if buying now is to get the biggest price discount possible.

Crashy_Time

Keswick1uk said:

It's not. That's just evidence it doesn't always go one way.

It's based on my belief that house prices are high now due to interest being exceptionally low. If interest rates rise substantially it will have an effect also on prices and potentially leave owners buying now in a position of a double whammy.

Putting it lightly IMO.

Slithery

Crashy_Time said:

Keswick1uk said:

But I'm looking for alternate views (or agreement) or other ideas...like the lodger one. Should things pan out badlt

If things pan out bad less people will be looking for rooms to rent or you could end up with someone refusing to move out quoting legal rights etc. and not paying if they lose a job or something, in general lodgers are not a great idea IMO. Best bet if buying now is to get the biggest price discount possible.

Lodgers can't 'refuse to move out'. You just give them the required notice that you put in their contract (1/2 weeks) and then just move their stuff and change the locks.

FreeBear

Slithery said: Unless prices drop by 25% over the next 5 years (which has never happened) negative equity won't be an issue.

Even if house prices collapse and interest rates go through the roof, negative equity is only an issue if you need to sell or remortgage. Property prices may wobble and fall a little, but long term, they still make for a solid investment.

Keswick1uk

Or remortgage. 
Which people do have to, relatively regularly. I'm not worried for now. I'm wondering if a 10 year fix would be better.

Keswick1uk

...but then there's the potential for penalty.

lookstraightahead

I remember that time Keswick. I lost a lot of money

AdrianC

Keswick1uk said:

I'm wondering if a 10 year fix would be better.

Basically, you're asking us to guess what'll happen to interest rates in 3-5-10yrs. Sorry, that's above our pay grade...

Remember that base rates are FAR lower than mortgage rates at the moment - so there's scope for base rates to rise substantially without much effect on mortgage rates. They've dropped without much effect, after all...

If he has a 2.5% 30 year mortgage, then in 5yrs time he will have repaid 12%, so with 20% equity now, will be looking at <70% LtV assuming prices stay flat. In 10yrs, he'll have repaid 25%, so 55% LtV, again assuming.

-ve equity at that point is all but impossible without the kind of price crash that even Crashy would find surprising.