Considering pulling out of purchase (rate rises)

Cheesy77

Hi all,

After some advice if possible. We've secured a new build plot and sold our current house, now a week or two from exchange. I'm now really getting quite nervous about the market and interest rates going forward. We've got a mortgage lined up at 3.1% but it's only a 2 year fix (in hindsight we should have gone with 5 years at 3.5% but thats gone now). Even 3.1% is by some way the highest rate we've paid since owning a property in the past 7 years. 

This is a big step up the ladder to a forever family home. I'm nervous about rates and the market in Sept 2024 when our fix runs out. Rates of 7% or similar I fear would really push us to the limit, alongside all the other cost of living rises. I know we'd have been stress tested by the bank but reality of actually paying 7% is pretty scary.

I'm considering pulling out of the purchase and continuing with the sale, moving into rented for a year or two and see how it plays out. But my partner is really keen to continue as we love the house. We are moving for my daughter's school more than anything. 

Am I over worrying? 2 years is a fairly long time and who knows what 2024 will bring but I'm clearly quite risk averse 

donutandbeer

Don’t see how paying rent for a year or two is going to help. If you rent for two years then by the end of two years it would have been when you would need to remortgage, so the interest rate could be the 7% you are worrying about now if you are thinking to buy after renting for two years. I think you have to be prepared to rent for a lot longer than two years for this to perhaps make sense.

Sarah1Mitty2

Cheesy77 said:

Hi all,

After some advice if possible. We've secured a new build plot and sold our current house, now a week or two from exchange. I'm now really getting quite nervous about the market and interest rates going forward. We've got a mortgage lined up at 3.1% but it's only a 2 year fix (in hindsight we should have gone with 5 years at 3.5% but thats gone now). Even 3.1% is by some way the highest rate we've paid since owning a property in the past 7 years. 

This is a big step up the ladder to a forever family home. I'm nervous about rates and the market in Sept 2024 when our fix runs out. Rates of 7% or similar I fear would really push us to the limit, alongside all the other cost of living rises. I know we'd have been stress tested by the bank but reality of actually paying 7% is pretty scary.

I'm considering pulling out of the purchase and continuing with the sale, moving into rented for a year or two and see how it plays out. But my partner is really keen to continue as we love the house. We are moving for my daughter's school more than anything. 

Am I over worrying? 2 years is a fairly long time and who knows what 2024 will bring but I'm clearly quite risk averse 

HTB closing and rates will have a massive effect on new build sales, you will probably get a better deal in the future TBH, but if you must fix do it for 5 years.

housebuyer143

Cheesy77 said:

Hi all,

After some advice if possible. We've secured a new build plot and sold our current house, now a week or two from exchange. I'm now really getting quite nervous about the market and interest rates going forward. We've got a mortgage lined up at 3.1% but it's only a 2 year fix (in hindsight we should have gone with 5 years at 3.5% but thats gone now). Even 3.1% is by some way the highest rate we've paid since owning a property in the past 7 years. 

This is a big step up the ladder to a forever family home. I'm nervous about rates and the market in Sept 2024 when our fix runs out. Rates of 7% or similar I fear would really push us to the limit, alongside all the other cost of living rises. I know we'd have been stress tested by the bank but reality of actually paying 7% is pretty scary.

I'm considering pulling out of the purchase and continuing with the sale, moving into rented for a year or two and see how it plays out. But my partner is really keen to continue as we love the house. We are moving for my daughter's school more than anything. 

Am I over worrying? 2 years is a fairly long time and who knows what 2024 will bring but I'm clearly quite risk averse 

It's natural to get panicked when they announce all this doom and gloom. Hell, I have no money worries and still panicked I would lose my job and be in financial trouble when they announced the recession.
2 months on and that's gone. 

If I hadn't moved in April I would probably be worrying too but once you move in and find out your financials are fine and you do not need to worry for at least 2 years you will feel better. 
Who is to say rates won't go down in two years? No one knows that far ahead. 

Gavin83

I would bet money (and I guess I kind of am really) that house prices will be higher in 2 years than they are now. I also wouldn't have gone with the 5 year fix at 3.5% but that's a different discussion entirely.

If you sold, moved into rented and then house prices went up 5-10% how much of a problem would that be for you?

lookstraightahead

25+ years of interest rates going up and down. When will it ever feel that it isn't a risk? At least you're buying with the knowledge that it's not always plain sailing 

[Deleted User]

Agree with @housebuyer143 The thing I have learned is that there will always be 'something'. Whether it's Covid, the Ukraine war, petrol prices rising, energy prices, recession, mortgage rates...We worry about what 'might' happen and invariably, something else happens that we couldn't have foreseen.

If you pull out and move to rented, you might find yourself putting it off again and again, all the while paying someone else's mortgage. Of course, I don't know what is going to happen. No one has a crystal ball, but to put it into perspective, it will never be perfect and it will never be the 'right' time, but as long as you feel it is right for you, then it is. I also think it's natural as you edge towards closing, that doubts will come up. You're making a huge life change and a huge investment, but try not to let your perspective be blurred by 'what ifs'. It is just as likely that what happens will be in your favour.

Sarah1Mitty2

lookstraightahead said:

25+ years of interest rates going up and down. When will it ever feel that it isn't a risk? At least you're buying with the knowledge that it's not always plain sailing 

The last time there was anything like this kind of volatility in rates was 30 years ago,(and that was over relatively quickly) most people buying today have no concept of those times. If the poster asking the question thinks they will struggle at the sort of rates predicted for the next few years they are very wise to pause, especially as they could get a cheaper new-build in future.

[Deleted User]

@Gavin83 Agree with what you are saying about house prices rising, but may I ask why you wouldn't have gone with a 5 year fix at 3.5%? I am about to apply to something similar so curious about why I maybe shouldn't!

Gavin83

Deleted_User said:

@Gavin83 Agree with what you are saying about house prices rising, but may I ask why you wouldn't have gone with a 5 year fix at 3.5%? I am about to apply to something similar so curious about why I maybe shouldn't!

I suspect interest rates will peak next year and then start to reduce so in 2 years time I suspect they'll be lower than they are now. However this is a complete guess on my part and no one knows where rates will be so it's for others to make their own decision.

Unfortunately my fixed term rate ends next year (terrible timing!) but I'll certainly be fixing for 2 years when I need to renew. I'd fix for a year if I could but I'm not sure that's an option.

MEM62

Cheesy77 said:

I'm considering pulling out of the purchase and continuing with the sale, moving into rented for a year or two and see how it plays out. 

Probably the worst thing you can do.  

Cheesy77 said:

2 years is a fairly long time and who knows what 2024 will bring. 

Exactly, so why are you trying to second guess the decision that is right for you now. 

Cheesy77 said:

Am I over worrying? 

Yes, and it is causing you to consider unwise decisions.  Life has risk, you cannot avoid it.  And trying to so so will often put you in a worse situation than just getting on it.  Buy your house, love it and get on with life.  Face whatever the future holds as and when it arises.