Considering lower my offer due to mortgage rates increase, is this a reasonable excuse?

Troy_af

Hello.

So I will try to keep this short as possible and get straight to the point. I put an offer in a few month back on a property and it was accepted, solicitors instructed etc, everything was proceeding fine. Given the price agreed and the mortgage rates at the time, I am at the very top of my budget. Now approaching (what I thought) was close to completion and my buyer has pulled out of my house sale. So at this stage the entire chain could collapse. But finding a new buyer is the least of my worries. Even assuming I do get a new buyer, my mortgage offer will expire before any new possible completion date (sales are now taking over 4 month to process).

The new rates will be around £100 (maybe more) per month. I will not be able to afford this, its is out of the question as the previous amount was already my budget at its max. I don't have any more deposit to put down and I don't think I can increase the term to get payments down. The only possible solution I can think of is that I request a reduction in the asking price to bring the payments back down.. which would be around £6,000.

I know I am well within my rights to ask for this because without doing so I will have to pull out and the chain will collapse. But on the other hand I know it sounds extremely cheeky and I would not be happy if it was to happen to me the other way around, so I am just looking for some advice.

The whole situation right now is an absolute mess. It is taking solicitors potentially longer to process a sale to completion than the 6 month that mortgage offers are valid for.

lesalanos

How much has the value of the property risen since you put your offer in?  Fortunately it doesn't sound like the sellers are looking to increase the price

k3lvc

You can ask for what you like - all depends on whether you have the intention of moving at any time soon

Having no buyer is far from the least of your worries as without one you're going nowhere at all 

This leaves the rest of your question a bit immaterial because, depending on the market in your specific area, I'd be expecting the vendor to re-market, potentially at a higher price, leaving it even more out of your reach

jj_43

higher interest rates = lower property valuations for a number of reasons and your situation describes in some detail why this occurs. It depends upon your local market if the impact of higher rates is greater than motivated buyers or sellers.

You mentioned that the £100 increase is unaffordable, and was were already above your budget, a lower mortgage borrowed won't bring this to affordable levels. You need to question if buying is right for you.

Troy_af

lesalanos said:

How much has the value of the property risen since you put your offer in?  Fortunately it doesn't sound like the sellers are looking to increase the price

We already offered above the asking price and above what the property was valued at by our surveyor and I don't believe that property prices have risen in our area since i out the offer in, in fact they may have dropped slightly.

Troy_af

k3lvc said:

You can ask for what you like - all depends on whether you have the intention of moving at any time soon

Having no buyer is far from the least of your worries as without one you're going nowhere at all 

This leaves the rest of your question a bit immaterial because, depending on the market in your specific area, I'd be expecting the vendor to re-market, potentially at a higher price, leaving it even more out of your reach

I am confident that I will get a buyer and probably quite quickly, that's why I said it was the least of my worries. It will be the mortgage rates increasing that causes this to fall through.

Yeah I completely understand the seller putting the house back on the market, I would do the same, but as mentioned above, I already gave significantly above asking price.

cymruchris

It wouldn't be a reasonable 'excuse' to me... If rates went down, would you offer more?

You're offering based on market value/demand/personal choice. 

If I were a seller, and was approached with a negotiation based on this, I'd either re-market or look at my other previous offers. There's a risk on both sides as to what potentially could happen, but you won't know until you decide to try and renegotiate.

Rates will always go up and down (although they've been down for quite some time).

prowla

Since the seller's interest rates on their new property will be going up too, maybe they could ask for more to cover their outgoings...

Altior

This has alarm bells screaming. If you have no headroom in your budget for a small rate increase, this purchase is outside of your range. I realise how difficult that may be to accept, being so far down the line. It might actually be doing you a favour though in the long run.

I do wonder if your circumstances have changed, as the stress test should not have been passed, given the information available. 

Troy_af

cymruchris said:

It wouldn't be a reasonable 'excuse' to me... If rates went down, would you offer more?

You're offering based on market value/demand/personal choice. 

If I were a seller, and was approached with a negotiation based on this, I'd either re-market or look at my other previous offers. There's a risk on both sides as to what potentially could happen, but you won't know until you decide to try and renegotiate.

Rates will always go up and down (although they've been down for quite some time).

No, of course if the rates went down I wouldn't offer more. I'm not considering offering less because the rates have went up, I'm considering offering less because the house is no longer affordable (as a result of the rates rising so much).

As to rates being down for quite some time I'm not sure what you mean by this? Nov last year I was offered 2.07%, May this year 2.7% and my broker has told me I would be looking at 4% to 4.5%, making the house I could afford in may, no longer affordable in Dec.

RelievedSheff

You are buying more than you can afford if such a small increase in rates takes it out of your budget.

Don't lead anyone on any further. If you can't afford it pull out now.