A Good Time For First-time Buyers?

Gibber_2

Hello,

Sorry, I know this is one of the eternal questions but it's very confusing out there! My partner and I are considering buying our own place having spent many years (and many thousands of pounds!) renting and we're wondering if now is a good time for us, or bad.

Mortgage deals are not as generous as they once were and lenders are being far more cautious about who they offer finance to. However, we're now both in a great position professionally and prices seem to be dropping, or at least levelling out.

Is this a good time to take on such a debt? As we have no chain, are we in a good position to make 'silly' offers?

I know there are many factors that will affect your response but I'd love to know what you think.

Apologies if I'm going over old ground!

Cheers.

dannyboycey

You'd need to get a REALLY good price for it to be worthwile. You have the upper hand so why not give it a go, if that's what you want to do.

Buying a house can be a drawn out process so bear in mind that if you offer £150k for example, similar houses may be up for less by the time you are getting your keys. How would you feel about that? Chances are that you may also have to ride out some negative equity if your deposit is less than 15% so make sure you get somewhere you're happy to stay for a few years.

Alternatively, you can keep saving for a bit longer and get even more house for your money.

brit1234

Wait a few months and see how the market is going and save some more. Prices are coming down and you will get far more for your money or be far less stretched for a little patience.

carpetbelly

Well, there are a couple of options for you really.

If you plan to move again in a couple of years and are looking for an investment, rent. Houses probably won't make money like that have done for a while yet.

If you look around find the home of your dreams or something you're happy to live in for many years to come, why not buy. As long as you can afford it, big deal at what price you've paid (to a point).

Why not decide what you're going to be doing first. If you plan to live in a house you purchase for a long time then why not look. If you can get the deposit together and get a mortgage then you're going to be in an exceptionally strong position and as such might be able to barter someone who needs a sale down.

Running_Horse

Good advice from carpetbelly.

Only you can know if this is right in your circumstances.

pinkshoes

Gibber wrote: »

My partner and I are considering buying our own place having spent many years (and many thousands of pounds!) renting and we're wondering if now is a good time for us, or bad.

How much is your rent, and how much is the type of property you're looking at. You need to compare the money you pay in rent to the interest on a mortgage. Google "BBC mortgage calculator" and work this out.

Gibber wrote: »

Mortgage deals are not as generous as they once were and lenders are being far more cautious about who they offer finance to. However, we're now both in a great position professionally and prices seem to be dropping, or at least levelling out.

That depends if you see the "less generous" mortgage deals as a good thing or bad thing! Personally I think it's good, as it stops people over-stretching themselves. Have you got at least 10% deposit saved up?

Gibber wrote: »

Is this a good time to take on such a debt? As we have no chain, are we in a good position to make 'silly' offers?

I know there are many factors that will affect your response but I'd love to know what you think.

If you're thinking about the property as a home you intend to live in for a fair while, and can afford the mortgage without any problems (it's recommended not to borrow more than 3 or 3.5x your joint salaries) then go for it. If you're in it for a quick profit, then wait.

Lots of FTBs haven't got a deposit saved up, so there should be less competition out there, and as a FTB you're chain free and in a strong position.

dannyboycey

pinkshoes wrote: »

If you're thinking about the property as a home you intend to live in for a fair while, and can afford the mortgage without any problems (it's recommended not to borrow more than 3 or 3.5x your joint salaries) then go for it. If you're in it for a quick profit, then wait.

A fair while being up to 10 years IMO. Negative equity can act as a ball and chain around your legs... I'd need to be really happy with the house and the surrounding areas to risk that.

beer_tins

It really depends on your own situation. You certainly don't have to rush into it out of fear of the market running away from you. If you have a 10% deposit and the amount you want to borrow is affordable then it might well be a good time for you to buy. The right time for you, in terms of what "stage" of life your at may not coincide with the best time in the market to buy, so it may still be good for you, even if not as lucrative as it was a few years ago! In general terms, if you like the place and area and it's affordable, why not?

Here's my situation, for contrast. I'm in my first home, bought in 2006, it's worth about £190,000 and I've got a £150,000 mortgage on it. I'm quite content for several reasons:

1) I don't see a "crash" happening, the market may stay flat or decline slightly in my area, but I don't think it will be that dramatic.
2) If the value of the property does fall, I'm still paying off equity at a faster rate.
3) I'm unlikely to fall into negative equity for the two reasons above. I just can't see the value falling below the value of the loan.
4) I'm on the first rung of the ladder, if anything a falling market plays into my hands as the value of my next home (bigger, more expensive) will fall more than the value of my current one.

The above is my own opinion of course, others may differ. What I would say to you is, take your time, save up a 10% deposit, do some research, don't overstretch yourself, buy somewhere you think you would still be happy in in 5 years.

dannyboycey

beinerts wrote: »

It really depends on your own situation. You certainly don't have to rush into it out of fear of the market running away from you. If you have a 10% deposit and the amount you want to borrow is affordable then it might well be a good time for you to buy. The right time for you, in terms of what "stage" of life your at may not coincide with the best time in the market to buy, so it may still be good for you, even if not as lucrative as it was a few years ago! In general terms, if you like the place and area and it's affordable, why not?

Here's my situation, for contrast. I'm in my first home, bought in 2006, it's worth about £190,000 and I've got a £150,000 mortgage on it. I'm quite content for several reasons:

1) I don't see a "crash" happening, the market may stay flat or decline slightly in my area, but I don't think it will be that dramatic.
2) If the value of the property does fall, I'm still paying off equity at a faster rate.
3) I'm unlikely to fall into negative equity for the two reasons above. I just can't see the value falling below the value of the loan.
4) I'm on the first rung of the ladder, if anything a falling market plays into my hands as the value of my next home (bigger, more expensive) will fall more than the value of my current one.

The above is my own opinion of course, others may differ. What I would say to you is, take your time, save up a 10% deposit, do some research, don't overstretch yourself, buy somewhere you think you would still be happy in in 5 years.

Mine couldn't differ more. Assuming your house is actually worth £190k (that's a whole other point for discussion) - a reduction of 20% would wipe out virtually every penny of your equity!

brit1234

beinerts wrote: »

I'm quite content for several reasons:

1) I don't see a "crash" happening, the market may stay flat or decline slightly in my area, but I don't think it will be that dramatic.
2) If the value of the property does fall, I'm still paying off equity at a faster rate.
3) I'm unlikely to fall into negative equity for the two reasons above. I just can't see the value falling below the value of the loan.
4) I'm on the first rung of the ladder, if anything a falling market plays into my hands as the value of my next home (bigger, more expensive) will fall more than the value of my current one.

The only point I agree is 4, it will be a lot cheaper to move up. However I disagree with the rest, have you got anything tangible to back this up.

What I see is:
1, Repossessions rising fast
2, Estate agents increasingly going bust, cutting staff and very slow business.
3, Lending tightening very quickly to levels close to 10 years ago.
4, Far longer sale times
5, Rapidly growing amounts of homes for sale.
6, Majority of buy to let lenders not lending, going bust or hiking rates affect new mortgages and remortgages.
7, Builders not being able to sell buy to let property flats
8, Credit crunch continuing for the next year.
9, US already in recession and us following
10, Inflation rising fast
11, Interbank lending rates static despite to cuts in interest rates stopping banks reducing mortgage costs.
12, Finally Property prices being 35-50% overvalued allowing a big scope for falls

The simple fact is the housing cycle typically follows a 18-20 year cycle with a crash in the end part of the cycle. We are entering that point now after the 1990 crash with our prices even more inflated than then. The market is extremely vulnerable.

Wait a few months and you will see the market get far worse.

beer_tins

dannyboycey wrote: »

Mine couldn't differ more. Assuming your house is actually worth £190k (that's a whole other point for discussion) - a reduction of 20% would wipe out virtually every penny of your equity!

We had it valued at that (one lower, one higher) a few months ago. Yes a 20% drop would wipe out most of my equity, but frankly I can't see that happening. If you are one of those people who is predicting a catastrophic crash then don't buy! Personally I think it is massively overstated. At the moment experts aren't even agreed that prices will fall nationally over 12 months. I'm not overly concerned, but I guess everyone's opinion is different...