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

Altior

Troy_af said:

user1977 said:

Troy_af said:

As to this post and others above, suggesting that a £100/month increase in interest payments alone (which btw could be more like £230/month if they continue to rise) is a "small increase" or insignificant, is beyond me.

I think the point is that you ought to have already budgeted for it (mortgages were only ever going to head one way), and whether it arises before or after you complete ought to be not particularly relevant.

Of course I understand that rates will go up and down. But the difference between 2% to 4.5%, as well as all the other rises in costs of living in such a short time period, will have an effect on affordability for most people. Hence, as I said, what was an affordable property 6 month ago for someone, may not be now. Again as mentioned, this is the apparent reason behind me losing my buyer.

I only was asking if a reasonable way out of this was to offer less, not to be bombarded with "its your own fault if you cant afford it". Sales are falling through due to interest rates rising and mortgage offers expiring before completion, there are many online articles covering this, so it is certainly not just me.

I'm not stating that it's your fault. And I do acknowledge that you are not asking for a lecture. I do sense however that you have not come to the realisation that this purchase is now out of your reach. If it wasn't, there would be no need for your original question. A mortgage should not put you on the limit, you need headroom, or there is a realistic chance of it ending up in a repossession. It would be remiss of me to not have pointed this out having read your opening post. 

RelievedSheff

Troy_af said:

RelievedSheff said:

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.

Thank you for your advice. But from these type of  comments I can only assume that some of you are totally unaware of the cost of living crisis that has arisen over the last 6 month. For the record this is apparently the same reason that my buyer has apparently pulled out the purchase, they can no longer afford the purchase.

So as to leading anyone on, this has caused me hell for the past year or so trying to move home and it has cost me thousands now in fees/surveys that I wont get back. The last thing I ever want to do is lead someone on, believe me.

As to this post and others above, suggesting that a £100/month increase in interest payments alone (which btw could be more like £230/month if they continue to rise) is a "small increase" or insignificant, is beyond me.

We are well aware of the cost of living rise. 

We have budgeted so that we can afford an increase in interest rates and subsequent repayments. 

Interest rates have been extremely low for a long time. That could not continue.

You can not afford the property you have offered on. Why keep up the pretence?

Nothing to be embarrassed about. Move on and find a cheaper property you can comfortably afford. 

Troy_af

housebuyer143 said:

As others have said, you were not fixing the rate at 2% for life, so what was your plan in 2 or 5 years when you go to remortgage and realise that rates are 6% or more, which is very very likely? Would you not be able to afford it? Have you thought about this at all? 

If you cant afford the rates at 4% which is still low in the scheme of mortgages then you will be in trouble. 
You are overextended and you need to be thinking about a smaller purchase. 

To answer your question, if I was your seller and you came to me saying your buyer had dropped out and and you wanted a reduction it would go right back on the market. I might have sympathy and let you get a new buyer but that would immediately be lost if you asked for the reduction.

Yes of course I have thought about the possibility of rates going up in the future, but is there not a limit to just how "safe" you can be realistically? What are people suggesting, that you go at 50% of your recommended affordability "just to be on the safe side"?

Of course if my lender gives me a new offer on the higher interest rate, then technically that is them saying that I can afford it, otherwise they wouldn't offer me the loan, I understand that. But what a lender, mortgage broker, or "stress test" says a person  can afford, is not necessarily what that person is going to be comfortable paying.

Thanks again for all the replies. I am not having a go at anyone, I do realise those saying it is my own fault could be indeed doing me a huge favour.

babyblade41

It comes across as you are trying to quantify your reason for dropping your offer on cost of living , interest rate rise.

When buying a house, unless a sparkly new build you will have to factor in maintenance costs,  unexpected repairs etc & so your affordability has gone out of the window.

If you also say affordability isn't too much of a problem then there must be another reason.

If I was your vendor then I'd re-market & put you to one side as you are a un reliable buyer 

SiliconChip

Troy_af said:

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).

I'm not considering offering less because the rates have went up...

But that's exactly what you're doing, your inability to afford the property at a new rate does not make it worth any less than it was before the rate rise. I'd agree with most other posters that this property is not one that you should be looking to buy, and to be honest I think you need to look at the affordability of staying where you are when your current rate ends and you have to find a new rate that may be high enough to cause you problems. You won't be the only person in that situation, but better to know about it in advance so that you can look at your financial situation to see what you can do about it before your lender gets anxious.

housebuyer143

Troy_af said:

housebuyer143 said:

As others have said, you were not fixing the rate at 2% for life, so what was your plan in 2 or 5 years when you go to remortgage and realise that rates are 6% or more, which is very very likely? Would you not be able to afford it? Have you thought about this at all? 

If you cant afford the rates at 4% which is still low in the scheme of mortgages then you will be in trouble. 
You are overextended and you need to be thinking about a smaller purchase. 

To answer your question, if I was your seller and you came to me saying your buyer had dropped out and and you wanted a reduction it would go right back on the market. I might have sympathy and let you get a new buyer but that would immediately be lost if you asked for the reduction.

Yes of course I have thought about the possibility of rates going up in the future, but is there not a limit to just how "safe" you can be realistically? What are people suggesting, that you go at 50% of your recommended affordability "just to be on the safe side"?

Of course if my lender gives me a new offer on the higher interest rate, then technically that is them saying that I can afford it, otherwise they wouldn't offer me the loan, I understand that. But what a lender, mortgage broker, or "stress test" says a person  can afford, is not necessarily what that person is going to be comfortable paying.

Thanks again for all the replies. I am not having a go at anyone, I do realise those saying it is my own fault could be indeed doing me a huge favour.

It's definitely not your fault. No one really expected rates to shoot up the amount that did in a short space of time and lenders have made their lending affordability tighter due to rise in bills. I can appreciate how many people have not budgeted for such a rise because they have never seen them go much higher than 2% in recent years. 

What the bank says you can afford and what you are comfortable paying are too very important things and you should definitely go with what you feel comfortable with. 
Your house should be somewhere you are happy living and you should not immediately move in and be worrying about payments. 

london21

Troy_af said:

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.

Limited information, we do not know incoming and outgoings, deposit amount,LTV, listed price. Price offered etc. 

You can try to ask the seller but they might just say no as there is still demand from buyers. 

Only you know what is comfortably affordable, things won't get easier in the short term as 3 more interest rate increases expected in 2022 alone.

With regards to the house do make sure you aren't stretching yourself too much which can later lead to reposession etc. 

All the best. 

cymruchris

Troy_af said:

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).

So you're offering less because the interest rates have gone up? It's the same thing worded differently.

Definitely not having a go at what you're saying, but please do ensure that your budget can afford more rate rises before committing to this deal. You talk about people not being able to afford 4.5 percenters - although it was my parents not me - I'm very aware of the time when rates were well into double digits. I'd be fairly confident we're not going there again, but never say never. When I took out my last mortgage around 2004 rates were normal at around 4.5 percent from memory - it's only recent years where historic lows have lasted quite a while. If you can make savings elsewhere to 'afford the rise' and also other rises ahead - then go for it. Just don't put yourself in a position where you're going to struggle if you've got to find another couple of hundred a month for the increased mortgage and general cost of living expenses. 

And I know you're wanting support in terms of what you're thinking, but the general consensus is be very careful. 

You won't be the first to think what you're thinking, and you won't be the last. Some will prepare for the upcoming rises better than others. Try to be one of them. 

Troy_af

RelievedSheff said:

Troy_af said:

RelievedSheff said:

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.

Thank you for your advice. But from these type of  comments I can only assume that some of you are totally unaware of the cost of living crisis that has arisen over the last 6 month. For the record this is apparently the same reason that my buyer has apparently pulled out the purchase, they can no longer afford the purchase.

So as to leading anyone on, this has caused me hell for the past year or so trying to move home and it has cost me thousands now in fees/surveys that I wont get back. The last thing I ever want to do is lead someone on, believe me.

As to this post and others above, suggesting that a £100/month increase in interest payments alone (which btw could be more like £230/month if they continue to rise) is a "small increase" or insignificant, is beyond me.

We are well aware of the cost of living rise. 

We have budgeted so that we can afford an increase in interest rates and subsequent repayments. 

Interest rates have been extremely low for a long time. That could not continue.

You can not afford the property you have offered on. Why keep up the pretence?

Nothing to be embarrassed about. Move on and find a cheaper property you can comfortably afford. 

Thank you again for the advice. The only thing I am still not understanding fully here is being told that I cannot afford the property, is this not the whole point of the lender running affordability checks and then giving me an offer?

As to finding a property that I can comfortably afford, I could comfortably afford this 6 month ago. A year ago I was looking at 700/month, then 800/month, now potentially over 1000/month. This is a dramatic increase, which is the difference between can and cannot afford for a lot of people in this situation. Everyone has a limit, even yourself. There must be an amount, which when reached, means your payments would also be too high.

I'm not saying you are wrong to say I cant afford it. I'm just saying it seems unfair to say that I should have budgeted better or that it is my fault, along with thousands of others who are also having to put off their house move.

eddddy

If you can't afford the property with the new mortgage rate - I guess you have 2 options... try reducing your offer, or walk away.

However, I think a lot of sellers would be very annoyed about you reducing your offer in these circumstances, so they might be keen to tell you 'where to go'.


And if other buyers have the same thoughts as you, they might offer less for your current property - so you might end up stuck again.