Concerned about house prices dropping - should I buy or wait

Ramouth

If I were you I would create a spreadsheet to look at various scenarios and calculate total costs.  I.e. A, buy now on good rate for 5 years house prices stagnate = x capital in property - cost of mortgage.  B, buy now on good rate for 5 years property prices fall by 10% = x capital in property - cost of mortgage.  C, don’t buy now, buy in 2 years time at 6% rate house prices haven’t fallen = x capital in property - cost of mortgage - rent.  D, don’t buy now, buy in 2 years time house prices have fallen by 10% = x capital in property - cost of 2 years rent - cost of mortgage.  

You can test out various predictions for house prices and interest rates to see in which sceanarios you would be better off and then have a think about which you feel are more likely to occur.

Personally I prefer to own than rent as I like the certainty so may be biased but would not be surprised to find that continuing with your purchase comes out quite well in many cases.

kkqd1337

Overall I would say just go for it. You've got a great 5 year fix, so obviously your view is you want to stay there about that long and Brighton is a great place to live. Forever popular.

You may make a bit of cash at the end, you may be lucky enough to be able to rent it and buy your next place, you may lose a bit of cash in 5 years. Who knows? Nobody knows. 

Don't worry about too many maybes.

You should however, take advantage of the fear at the moment, and at least try and get a bit of cash knocked off. Nothing to lose.

london21

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.

You have gone for 5 years fixed which is good.

Without knowing much about the market and price offered in comparison to properties in the area.

You are a first-time buyer and depending on price will benefit from the stamp duty increase.

With regards to service charge, depends on your affordability and how much you like the flat.

You did not mention about the lease, does it have a long lease etc.

t1redmonkey

I'd just go ahead with it in your situation.  Even if you wait, mortgage rates are just going to increase for at least the next 6-12 months, so you could end up paying the same in the long run. 

Also if you're renting currently, then you'd also be paying for many more months of rent while you're holding out waiting for the fall (and you don't know what % the fall is eventually going to be anyway so  you may not recognise when the right time to buy actually is when it does come).

bamgbost

go on and buy. fix for 5 years. things will have settled down by then

killerferret666

Id go with it. 5yr fixed at a good rate

If youre worried about the future in 5yrs, you wont be buying over the next 3yrs if interest rates do go up to 6% like they say. 5yrs should have started to drop a little or be more prepared and use to living costs.

Also in that time if possible save as much as you can into savings account, the rate will be higher than over paying the mortgage, at the end of the 5yrs, pay off a bit of the mortgage with the money to help lower the mortgage to close to what it is now.

Or of course if the mortgage is 30yr length now, in 5yrs just up it back to 30yrs from 25yrs to keep monthly costs down. (Not ideal but keeps it affordable)

AliceBanned

One factor is are you paying rent if you don’t buy, or living with family? If paying rent, is the cost of this higher than the interest cost on the mortgage? If it is then you’re likely to be better off going ahead.

if prices are showing any clear signs of falling in Brighton then you could try to renegotiate the price but you don’t need to necessarily- take a hit if they fall, they always recover and a five year plan will protect you somewhat as you won’t need to sell at a lower price. Unless there’s a massive crash and nobody can know what’s going to happen.  Buying feels secure to me especially the more the mortgage is paid down. The start is scary but if your margins aren’t too tight I’d say go for it, especially if the place is what you want in a home for a few years.

[Deleted User]

Definitely TRY and renegotiate the price (on the reasonable basis that the market has changed unexpectedly) and if you don't get anywhere, nothing lost (the seller will still want to sell to you at the original price). And, you have a good mortgage rate in hand, which might not be available again for a long time.

Agree that the only solution is do a spreadsheet setting out the various costs of proceeding in good/moderate/worst case scenarios compared to the cost of renting. And don't stretch yourself financially if you do proced!

My hunch, for what it's worth, is that UK houses were fairly unaffordable by historical standards PRIOR to this sudden mortgage rate crunch so were already in bubble territory. If the bubble pops, it could pop hard. But no-one really knows and perhaps we'll get a bout of hyperinflation that wipes out everyone's mortgages & savings (in which case, buying a really, really expensive property is possibly the best play...provided you keep it!).

sheramber

If the value of your flat goes down so does the value of what you buy next., so what you lose on one you gain on the other

[Deleted User]

If you have a 5 year fix I'd lock it in now. The chances of prices being lower in 5 years time is miniscule.