Selling and buying, selling and renting or staying put

sturgeon

I have my flat on the market (in another post on the forum) and am having to get realistic with the selling price. I do not have to sell at the moment, I don't need to sell and move at all in the foreseeable future but I'd like to move into a new area with more in the vicinity (I live in NW London currently).

My first option is continuing to sell and buy. I expect to get a decent discount on any property on the market on the basis that news on interest rates is very negative, many buyers are holding out due to affordability issues and hence anyone really needing/wanting to sell now will need to accept offers. So if I accept a lower price on mine I think i'll see the same saving on a property I buy, which stacks up with some viewings I've had so far after speaking to estate agents. The downside of continuing this is I am seeing lower numbers of properties coming onto the market and still haven't fully decided where to move to, or if I move into a share of freehold flat vs leasehold. Yes leasehold has a bad rep due to service charges but these are common in London and still sell easily in the right locations.

Selling and buying would mean my new monthly costs (mortgage and bills) would be c. £2.8k leasehold flat, or £2.4k if share of freehold and most of my savings would go into this.


Second option is to sell and then rent for a year. I'd do this to get a change of scenery and to rent in an area I'm considering buying in. Also, it means my next purchase is easier a I don't have a chain below me so have less pressure to find a buyer in a short space of time so I can seriously search for properties and make an offer. I'd also do it in the hope that interest rates have dropped slightly, so assuming I start renting from September 2023 then by Sep 2024 I'd hope that a 2 year fixed deal would be 3.5% or so, probably optimistic? An upside to this approach is putting all my money into savings/ISA's, which would be c. £250k and hence earning £600-700 a month interest after tax which would contribute towards rent..

Moving into rental means monthly costs (based on where I'm looking, rent and bills) of c. £2.9k (but have the £600-700 of interest after tax to balance this)


My other option is just staying where I am, continuing to save for another year, hoping the property market is more optimistic in 9-12 months time meaning I can sell more easily. I have no faith that I'd get more money from the sale in 12 months time, it will be the same as now or less. I'd also hope interest rates are lower too, which is the main reason to wait to buy again in general.

Staying put means monthly costs (mortgage and bills) of c. £2.4k (with monthly interest from savings of c. £200 after tax)

I am tempted to sell and rent just to make my next purchase easier and hope to ride out the mortgage rate highs, hoping they'd be lower in 12 months time. It does seem a little wasteful to throw all the money at rental though. I can equally stay put, I just think based on my current experience trying to sell here that it won't be particularly easier in 12 months time, and I'm better off to just sell for a lower offer and get out now. 

I'd also expect house prices to slightly reduce over the next 12 months meaning that if i take a year out of property ownership, I'm not losing out.

Would appreciate your thoughts and any questions as I'm really unsure what's best right now.

dimbo61

Huge demand for rental properties in many parts of London and this has caused a supply and demand issue.
The very thing you talk about Rate increases is hitting Landlords just as hard as home owners but they are already on Interest only loans.
For example £100,000 IO mortgage at 3.45% is £290 a month 
£100,000 IO mortgage at 8% is £750 a month.
So with the BOE increasing the Base rate from 0.1% to 4.5% with more to follow finding a nice rental maybe much more difficult  than you think.
You have security of your own home.
Why do you want to move ????

You can only put £20,000 a year into ISA,s 
Any other savings will be hit with TAX if you earn over £1,000 lower rate taxpayer or £500 if higher rate tax payer.
Overpay your current mortgage and save into ISA,s 

sturgeon

Is overpaying my mortgage for a year really going to make much difference if i sell and move in a year Even making the maximum overpayment of £30k (10% of the mortgage) will mean a £1.5k advantage vs not doing it. Which is something but not considerable.

I will be putting maximum into ISA's but can only do it for £40k, as I opened one in the last tax year and can open one for this year. So the vast majority of the remaining savings I'd incur 40% tax on.

MultiFuelBurner

The answer may be in the 2007-2009 last recession and how London prices were affected as it looks likely we will see similar interest rates this year to the last recession.

London may be hit harder earlier and bounce back quicker but that's just my opinion.

Personally I would never leave the property market for any longer than necessary. It might not be where you left it.

MFWannabe

Personally I’d stay put; I wouldn’t leave housing market to rent; you may struggle to get back into the property market 
You are also not sure where you want to live 
overpay current mortgage; put money into savings and take your time to decide where you want to be