Advice on reducing asking price

Sarah1Mitty2

mi-key said:

"Negative equity is easily avoided now though, you just don`t buy a house at bubble prices when interest rates have started to rise"

No, you buy a house when you can afford the monthly repayments, are offered a mortgage and find a house you want to live in.

Until mortgages become more expensive than renting, people will always keep buying

No, people will stay at home, rent rooms, house-share or find cheaper rent with sensible private landlords who are not mortgage debt slaves because if the monthly payments are unaffordable they won`t "buy",

https://inews.co.uk/news/house-viewings-fallen-estate-agents-warn-uk-housing-market-crash-1923804

newsgroupmonkey_

JJR45 said:

mi-key said:

Until mortgages become more expensive than renting, people will always keep buying

I Believe mortgages are a fair bit more than renting now.

A quick squiz round my nearest city (Southampton) suggests that a 2 bed terrace is about the same to rent as a 90% mortgage would be.

I dunno if that's representative of all areas....

Sarah1Mitty2

newsgroupmonkey_ said:

Sarah1Mitty2 said:

RelievedSheff said:

lookstraightahead said:

MobileSaver said:

lookstraightahead said:

MobileSaver said:

lookstraightahead said:

MobileSaver said:

lookstraightahead said:

I think the worst situation to be in would be paying over valuation now , with interest rates as they are. Or even near to current valuation as this is going down (in my opinion).

As you said recently, we see life differently. You and others seem to view their home as just a pile of bricks, in my world most people see their home as more than that.

What I don't want is my "dream home" becoming an absolute nightmare.

If, like most people, you buy a home with a five-year or longer fixed rate mortgage then how does that become an "absolute nightmare"? What specifically are you afraid of?

I'm not afraid, just sensible. I feel you are more afraid

Er, ok, so if you are not afraid of anything then how can buying your home with a five-year fixed rate mortgage become an absolute nightmare? I genuinely don't understand what you mean.

You're twisting my words.

Your actual words were "What I don't want is my 'dream home' ... becoming an absolute nightmare." You then continued with "A property that is an absolute nightmare is much worse than missing out on a dream home."

I've simply asked how does someone's home become an "absolute nightmare" and for whatever reason you seem reluctant or unable to answer.

Seriously. It becomes a nightmare if you've paid too much and you're in negative equity if you need to sell (and debt). And that is an extremely difficult position to get out of (as I have experienced).

You really don't need to agree, but you don't need to waste your valuable time and energy on me as I will not change my opinion.
have a lovely day (and I mean it 😊)

Negative equity isn't the end of the world. We were in it for a long time after we bought our previous house in 2007.

We survived. We still had somewhere to live. That house was still our home. It's value was irrelevant.

Negative equity is easily avoided now though, you just don`t buy a house at bubble prices when interest rates have started to rise.

Surely that is dependent on whether you are buying and selling?

I mean, if you're renting then perhaps.

Ultimately, the only people that lose out during negative equity are those who sell to rent or get out of the housing market.

And people who are stuck in a house or flat they were led to believe was the first step on a magical "ladder"?

Gycraig

Sarah1Mitty2 said:

mi-key said:

"Negative equity is easily avoided now though, you just don`t buy a house at bubble prices when interest rates have started to rise"

No, you buy a house when you can afford the monthly repayments, are offered a mortgage and find a house you want to live in.

Until mortgages become more expensive than renting, people will always keep buying

No, people will stay at home, rent rooms, house-share or find cheaper rent with sensible private landlords who are not mortgage debt slaves because if the monthly payments are unaffordable they won`t "buy",

https://inews.co.uk/news/house-viewings-fallen-estate-agents-warn-uk-housing-market-crash-1923804

You think landlords with fully paid off properties won’t also whack up the rent when everyone else does ? Unfortunately it’s called market rent and most will charge it, they aren’t a charity which based on landlord forums they say 10 times a day. 

Again you can post house price crash articles every year for the past 10 years, I would still chew your arm off to have a chance at a property at 10 years ago prices 

JJR45

mi-key said:

JJR45 said:

mi-key said:

Until mortgages become more expensive than renting, people will always keep buying

I Believe mortgages are a fair bit more than renting now.

Not for equivalent properties in lots of areas. My house would cost me £1100 a month to rent, I pay £629 mortgage. Even if I swapped to a 4.5% deal this would only go up to £732.

You are calculating with your equity, surely if you are talking cheaper then renting it is best to calculate with a ftb deposit (as they are more likely renting)

 How much would it cost to buy now with a 10% deposit per month?
You would not even get a 4.5% deal either.

Or are you saying a £140k house rents at £1100?

We rent a 4 bed at the moment for £850pm, at a guess it would be £250k on the market.
So with a 10% deposit it would cost around £1,382k to buy.

Gycraig

JJR45 said:

mi-key said:

JJR45 said:

mi-key said:

Until mortgages become more expensive than renting, people will always keep buying

I Believe mortgages are a fair bit more than renting now.

Not for equivalent properties in lots of areas. My house would cost me £1100 a month to rent, I pay £629 mortgage. Even if I swapped to a 4.5% deal this would only go up to £732.

You are calculating with your equity, surely if you are talking cheaper then renting it is best to calculate with a ftb deposit (as they are more likely renting)

 How much would it cost to buy now with a 10% deposit per month?
You would not even get a 4.5% deal either.

Or are you saying a £140k house rents at £1100?

We rent a 4 bed at the moment for £850pm, at a guess it would be £250k on the market.
So with a 10% deposit it would cost around £1,382k to buy.

My neighbours were paying 800 a month for a 2 bed 3 years ago no idea how much now. 

Even at newest prices 160000 with a 16k deposit at 5 percent over 25 years is still only 844 a month on a normal mortgage, lower over a longer term. 

Your property is massively underpriced tbf and isn’t really an accurate representation of the market. As on a btl mortgage at 250k with a 25 percent deposit it would cost 782 a month at 5 percent. 

It’s very rare that mortgages will ever be more expensive than renting in reality except maybe in London. 

BV88

In order to determine the monthly cost difference between renting and buy you need to take the monthly rental yield (minus monthly interest on cash savings) and compare it to the monthly interest costs (not capital repayment) of buying the equivalent property.

Average U.K. rental yield = 3.6% 

Average U.K. house price = £296,000

20% deposit = £59,200

Average 5 year fixed rate mortgage = 5%

Average 5 year fixed risk free cash saving rate = 4.5% 

For the average at the moment month one looks like this, cost of renting:

£888 (rental yield) minus £223 (cash yield on deposit in fixed rate account) = £665. Note that the £223 may be lower depending on individual tax situation. 

Versus cost of buying:

£986 (mortgage interest in first month on £236,800), remember we ignore the capital repayment so the actual cost of the mortgage will be higher than this 

So at current averages renting is cheaper per month by £321. Of course there is huge variation  and this is just an average, but it shows the dramatic impact interest rate changes have on the economics of buying vs renting. When the base rate was 0.1% things were skewed far more favourably to the buyer than the renter. 

Now the big uncertainty is what will happen to the value of the asset over time. Over longer periods the value will almost certainly increase and therefore so will the rent. So over time the economics get worse for renting and better for buying. Buying is almost always better in the long term for appreciating assets like houses. 

However with pretty much universal forecasts suggesting nominal house price falls in the next 12 to 18 months, or even if they stay flat, renting could be better than buying. Due to the now much higher cost of capital, your landlord may essentially be subsidising you to live in the property. Plus they will also be taking the hit of any capital value depreciation if indeed house prices do fall. 

This is a difficult situation for many people to get their head around as things have been so heavily skewed in recent years toward the house buyer rather than the renter. People always say ‘Rent is dead money’, well guess what interest payments to the bank are equally ‘dead money’ as rent! This is basically caused by the fact rent may have increased by 15% but the cost of capital has increased 300%, it’s totally distorted the market dynamics of the past 14 years. 

As with anything it is totally dependent on personal situation but the rent = bad, buying = good, has really been flipped on it’s head in a world where house prices are flat or declining and interest rates are higher. 

RelievedSheff

JJR45 said:

mi-key said:

Until mortgages become more expensive than renting, people will always keep buying

I Believe mortgages are a fair bit more than renting now.

Not sure where you are looking but that certainly isn't the case here.

Our mortgage is £1200 per month. The rent on the same property over the road is £1200 per month.

Difference being in 12 years we will own our property outright. The tenants won't and will be continuing to pay rent.

RelievedSheff

And how did all this help the OP answer their initial question?

[Deleted User]

BV88 said:

In order to determine the monthly cost difference between renting and buy you need to take the monthly rental yield (minus monthly interest on cash savings) and compare it to the monthly interest costs (not capital repayment) of buying the equivalent property.

Average U.K. rental yield = 3.6% 

Average U.K. house price = £296,000

20% deposit = £59,200

Average 5 year fixed rate mortgage = 5%

Average 5 year fixed risk free cash saving rate = 4.5% 

For the average at the moment month one looks like this, cost of renting:

£888 (rental yield) minus £223 (cash yield on deposit in fixed rate account) = £665. Note that the £223 may be lower depending on individual tax situation. 

Versus cost of buying:

£986 (mortgage interest in first month on £236,800), remember we ignore the capital repayment so the actual cost of the mortgage will be higher than this 

So at current averages renting is cheaper per month by £321. Of course there is huge variation  and this is just an average, but it shows the dramatic impact interest rate changes have on the economics of buying vs renting. When the base rate was 0.1% things were skewed far more favourably to the buyer than the renter. 

Now the big uncertainty is what will happen to the value of the asset over time. Over longer periods the value will almost certainly increase and therefore so will the rent. So over time the economics get worse for renting and better for buying. Buying is almost always better in the long term for appreciating assets like houses. 

However with pretty much universal forecasts suggesting nominal house price falls in the next 12 to 18 months, or even if they stay flat, renting could be better than buying. Due to the now much higher cost of capital, your landlord may essentially be subsidising you to live in the property. Plus they will also be taking the hit of any capital value depreciation if indeed house prices do fall. 

This is a difficult situation for many people to get their head around as things have been so heavily skewed in recent years toward the house buyer rather than the renter. People always say ‘Rent is dead money’, well guess what interest payments to the bank are equally ‘dead money’ as rent! This is basically caused by the fact rent may have increased by 15% but the cost of capital has increased 300%, it’s totally distorted the market dynamics of the past 14 years. 

As with anything it is totally dependent on personal situation but the rent = bad, buying = good, has really been flipped on it’s head in a world where house prices are flat or declining and interest rates are higher. 

Thanks for the figures. Just trying to understand where the 223 in savings is coming from for the rent option but not applicable to the buy option?