Concerned about house prices dropping - should I buy or wait

pptdgc

I had my offer accepted on a flat (in Brighton) a few months ago - my offer was the asking price and the mortgage company valued it at the same amount back then. I have an agreed 5-year fix on a rate of 2.6%, not perfect but certainly lower than the rates I'm seeing now - it expires in December. I'm also a first-time buyer.

It hasn't gone through yet but I have a few concerns with the current economic situation.

-  I'm worried that if there is a crash in house prices my purchase will lose value straight away, even a 5% drop would be a significant amount
- With the increases in the cost of living, I now have some concerns about affordability  as this was at the very top of my budget
- I've discovered that service charges have been higher than I expected/was told

I'm unsure on whether to not go ahead with it now and wait to see if house prices do drop, or just go ahead with it as I have an okay-ish rate. If I did wait, I could end up waiting years for the mortgage rates to come down again. I wonder whether it's worth asking the seller if he's willing to re-negotiate given the current situation.

Martico

It's impossible to know for sure. I bought at what at the time I felt was certain to be the top of the market (late 2016), and was clearly proved wrong. However, I bought in the knowledge that I could afford the place and I was set to stay here for many years. So any fall in headline house prices wouldn't affect my day-to-day.

With a mortgage you are assured of at least one thing: your mortgage debt will not rise, it's baked in as soon as you sign (and falls every month as you pay it down). It should also hopefully inflate away further, assuming you get at least some nominal pay increase over the coming years. Of course, the cost of servicing the mortgage may well rise, but a five-year fix reduces the immediate risk of this.

As for service charges, that's something only you really know about regarding affordability.

I'd ask myself if I was planning to have the place for years, and if I could afford the cost of living there and paying down the mortgage. I'd try to put speculation about market crashes out of my mind. Truth is, no-one knows if one will happen, how deep it would be, or how long things would take to recover. If you have secure enough income, with prospects for that income to rise, you can work out how affordable your new debt is. 

Good luck, I know it's a stressful decision.  

comeandgo

Only sure thing is if you rent for another year or two that’s more money going into someone else’s property and it could be going into your own.

movilogo

If you were buying a house, I'd have said go with it as 2.6% is very good rate and if you live long term, temporary price drop should not affect you.
But as you are buying a flat, very soon you are likely to grow out of it and would be looking to upgrade - at that point negative equity may bite you.
I'd say if you like the flat, re-negotiate the price and if no success just walk out and look for houses which are within your budget.

housebuyer7

As Brighton is mostly flats unless you have big £££ to afford a house, I would say Brighton is a good investment for property.

Sarah1Mitty2

pptdgc said:

I had my offer accepted on a flat (in Brighton) a few months ago - my offer was the asking price and the mortgage company valued it at the same amount back then. I have an agreed 5-year fix on a rate of 2.6%, not perfect but certainly lower than the rates I'm seeing now - it expires in December. I'm also a first-time buyer.

It hasn't gone through yet but I have a few concerns with the current economic situation.

-  I'm worried that if there is a crash in house prices my purchase will lose value straight away, even a 5% drop would be a significant amount
- With the increases in the cost of living, I now have some concerns about affordability  as this was at the very top of my budget
- I've discovered that service charges have been higher than I expected/was told

I'm unsure on whether to not go ahead with it now and wait to see if house prices do drop, or just go ahead with it as I have an okay-ish rate. If I did wait, I could end up waiting years for the mortgage rates to come down again. I wonder whether it's worth asking the seller if he's willing to re-negotiate given the current situation.

Your fix rate will be a historical relic soon, the news coming out today about mortgage rates is bad bad bad for people hoping to lock in price gains, but the price you are paying now won`t be appealing to people borrowing on higher rates in future. I would say Brighton will be hit very hard by the return of more normal borrowing rates. 

jonnydeppiwish!

If house prices drop and you stay in rented, how much of the landlord’s mortgage will you be paying?
A house isn’t about profit - it’s about having your own place to live.

House price drops? Possibly but predominantly those which are significantly overpriced and those which people paid over the odds for. Looking more at stagnation of house prices imo, similar to early to mid 90s.

lookstraightahead

Surely everyone who ever buys knows that at some time prices will drop.

you've got a great interest rate there - I would continue.

lookstraightahead

comeandgo said:

Only sure thing is if you rent for another year or two that’s more money going into someone else’s property and it could be going into your own.

Except if you need to sell in two years you could be much worse off than renting. So at present I would say you have to stay put for a while if you buy now.

Sarah1Mitty2

I would just avoid the Brighton flat market just now, and I don`t think you will find much value from a forum either it is just going to be the rent V buy camps throwing out the usual statements. Watch some financial news, the changes going in in borrowing are massive, then make your decision.

jj_43

its already worth less than your offer, you have stated strong reasons why its not the right time for you.