First time buyers dilemma

davidandrose

Can anyone help advise my partner and I if we should buy a new terraced house for £140,000 in York. We have been keeping our eye on terraces on this road and this seems reasonably priced.

Our dilemma is that we currently live on the same street, renting, for only £525 per month. The mortgate cost for the house we are looking to buy would be about £750. With all the current problems with the housing market at the moment we really can't decide if it would be best to go ahead and buy or just to wait. Our joint annual income is in the region of £40,000 so whereas £525 is comfortable, £750 would mean we would be stretched each month.

Any thoughts appreciated!

BiggaThanBen

£750 - is it interest only or repayment mortgage ?

carolt

No - don't buy.

If you would be stretched to meet the monthly payments, this is not a good time to be taking risks, as house price falls are widely expected.

If you can negotiate a sufficient discount and get a good enough long-term fixed rate that mortgage payments are affordable, that's a different matter. But there's no point putting yourself financially at risk to buy an asset potentially falling in price. Even the most optimistic forecasts are not expecting prices to rise in the short-medium term, so you have nothing to lose, and everything to gain (£225/month at least, at current rates!).

Carefully check the motivations of anyone on this site who tells you to buy now anyway - you will find lots of them are buy-to-let landlords worried about the price of their portfolios crashing, or others who have just bought at the peak of the market and are now worried about negative equity.

m00m00

York is a very volatile market at the moment, and it's one of the areas I'm tracking via property bee

I'd certainly hold off for a few months at the very least and keep an eye on the market

pamaris

This decision may boil down to what's cheaper versus what's best for you. It depends entirely on your preferences & current circumstances in life.

It will be cheaper to rent but is it the best? It might be.

We will soon be purchasing a 2 BR terrace. Where we are (South Manchester) we can rent one for £600 a month or buy one for £785 a month. Financially, it would be better for us to wait. However, we are going ahead with it because we've moved 6 times in the past 7 years- with 3 of those being overseas moves... we have 2 little ones and while it will be a squeeze in a 2 BR we just need the security of knowing that we can settle in.

Plus, we managed to secure a really good mortgage deal (5 year fix at 5.24%) and I don't know what sort of lending options will be available in a year or two.

We also make around £40k a year combined & are buying a house at a similar price. We specifically looked for a house that had scope for expansion, so that if we were stuck in our house, we could adapt it to suit our needs.

Either which way, I know that it's a bad situation. Neither option is attractive. It feels like more of a gamble to me to rent at this point- simply because I don't want to be at the landlord's whim. Our life circumstances determine that we have to move now (we have been at MIL's for over a year saving a deposit & it's time to get out!!).

That said, if you have a decent landlord & a reasonably secure tenancy- you've got nothing lose by waiting for a year or two. If we didn't have kids, we'd be renting.

We are going into it with open eyes; we have redundancy & disability insurance... and plan to save a mortgage offset amount each month. The main thing that is bothering me at this point is that I hope I still like it once we move in.

I think that at this point it is just going to come down to making an informed decision and making provision for the fact that it might not be best financially to buy, but it might be the right thing for you at this stage in life. However, it might not be. Only you can decide.

p.s. I just wanted to add that I am pretty frugaliscious & a savvy shopper... plus we have no debt... I think the only people who buy now that will still have their house in 4 years are those that can live without luxuries.

teabelly

How much of a deposit have you saved up?

House price falls will depend on local demand in your area. If the credit crunch carries on even if prices do fall you may not be able to get a mortgage big enough. It is a gamble either way. If you buy now any negative equity will be offset by a reasonable deposit and that prices will rise over time and you wouldn't be in negative equity forever. Hometrack is suggesting 1% rise for 2008, more negative forecasts are for a 2% fall. Doom sayers are on about 10% falls. The losses will be mostly be in new build flats and ultra expensive property. Bread and butter houses in decent areas with decent schools are unlikely to be affected badly as those are properties that everyone wants most of the time.

After saying all that you said you'd be stretched to afford it so the answer is don't buy. Being stretched in good times is sometimes a risk worth taking. Stretching yourself in volatile times might not be so sensible. If only £200 a month extra outgoings is the difference between coping and stretched then you are in more tricky financial circumstances than you realise unless you are also saving hundreds per month and wanted to continue doing so.

beingjdc

teabelly wrote: »

Hometrack is suggesting 1% rise for 2008, more negative forecasts are for a 2% fall. Doom sayers are on about 10% falls.

Might be true for 2008. Up to 2010, however, Doomsayers are on more like 40% falls, the futures market is on about 15%, and economists vary anywhere between a small rise and a 30% fall.

So who knows, frankly. Depends whether the government decides to use our taxes to bail out the mortgage banks, I suspect.

m00m00

the OP can find out exactly what's happening in the area they are looking at by looking at my property bee thread, as stated York is one of the areas I've been tracking for the past 7 weeks. Week 7 stats to be uploaded later tonight

m00m00

as the original poster is new, and won't know how to search, here's this weeks york stats

81 properties were reduced in past 7 days, that's 3.69% of all property on the market

the maxium reduction was 49950, a 12.49% reduction

the average reduction was 9722, 4.53% reduction

these are similar numbers to those seen every week for the past 7 weeks.

the market in york is going one way, and that's down.

people should not rely on national indexes for local decisions.

davidandrose

What a great response and lots of advice, thank you everyone who has contributed.

We are still going to view the house tomorrow as planned. For us to go ahead we would try to negotiate a big reduction in the asking price. Even still we would be happy to hold off and keep an eye on the market whilst we save our pennies! Thanks again.

Zammo

Do not buy.

We are at the beginning of the worst financial crisis since the 30's.

In case you're not convinced, I challenge you to find just one person who thinks that prices will rise over the next 12 months.