concerns about houseprices/mortgages

I wasn't on the attack. You gave us the information that you were a FTB who isn't sure about the property market. Generally the political vibes show nothing exciting to cause much movement in house prices at all, you've only shown me two options and without the benefit of knowing your mind, I'm simply stating the obvious and providing another angle, for the benefit of clarity. I've also responded to why your scenario 2 is unlikely to happen in the near future.

Worst case scenario for you is that after 5 years on a low rate of interest, rates have increased to hellish levels when you come out of that deal that you simply can't afford to pay and are forced to sell and rent again. Otherwise, more likely, you can just about afford repayments because your wages have gone up too in that time so it doesn't really matter that your house is worth less than you paid for it because you can still fit your family in. Wait another 5 years and it's shot up in value again.

No one knows. It's the risk that millions of us take; some of us lose the game and maybe climb back up on the horse, but most of us end up with a house that we own at the end of 25 years that is worth far, far more than we paid for it and a future where we no longer worry about the repayments or keeping a roof over our heads.

Lets just say, we bought our house 12 years ago, the same time you have been renting. we now have over a hundred grand in equity on our house. What have you got for your rent money? Buy now just in case things turn out unexpected and prices rise you out of the market, then once you buy even if prices go down, you can sit in your house until prices go up again! the thing that should concern you more than price hikes is interest rate hikes. Make sure that if they go up you can still make the payments.

dragonfly02 wrote:

Hi all, i'm a FTB and have been researching property in my area.
Whilst we are able to buy now, we are trying to decide how house prices may change over the year.

The mortgage we have been offered is fixed 5 yr at approx 4.99% and about 3.5 times our wages.

I'm new to property so have no idea about buying now or waiting, can someone outline the pitfalls of waiting i.e if house prices fall by 40% there will be more buyers and less houses (is this correct)
Also will the banks be likely to either cut multiples or raise their interest rates to make it harder for first time buyers to get on the ladder?

In short what I am getting at is with the mortgage details above, if house prices dropped by 40% would this type of offer still be available and would the banks tighten their criteria?

Thanx in advance

The best advice I can give is that you do your own home work and make your decision based on what you feel comfortable with.

You'll find that there are 2 distinct camps on these future house price threads.

FTB'ers who are desperate for prices to come back to normal levels and those who stand to take a hit on their investments if prices fall.

Don't take any notice of the "Get in now or you'll miss the boat" argument or the "House prices are going to crash" argument.

These are the 2 extremes of the debate and entirely related to what people want / need to happen to the market.

14 years ago my husband and I bought a flat in London, which in 4.5 years went up by 10K (seems like nothing now!) and we were paying 12% interest on a fixed rate. But it had only been a few years before that rates were as high as 16%. It's advisable to borrow enough so that you can absorb a rise in interest rates (say 2%) but it's a good idea to fix for 5 years if you think the rate is good. It's impossible to predict what rates will do, but I am now fixed at 5% so my mortage now is less than it was 14 years ago on a house in Surrey which is worth 300K! Our house went up by 100% in a matter of a couple of years after we bought it which wasn't predictable and we had fixed the rate (can't remember the rate but maybe around 7% nearly 10 years ago). In 5 years time hopefully you will be earning more money - my husband and I are both earning about what we were 8 years ago so that isn't guaranteed either.

We have been lucky in property over the years, but haven't ever stretched ourselves too much and have done a lot of work on the properties ourselves. A fixed rate gives you peace of mind and a predictable monthly amount over that period of time. A repayment mortgage will mean that each month you are paying off some of the capital and that gives great peace of mind. Over say 10 years, what at first seems like a large amount to pay out may well be easily affordable 10 years later. When I went to university, my tiny 1 room in a shared house cost more each month than my parent's mortgage on a large house which my mum thought was hilarious.

Property maintenance is a big consideration and decorating can cost loads. A landlord can get the boiler or cooker fixed on a rented place but when you own your own place it's up to you to pay out.

My advice would be to maybe put aside a little money each month for a 'house fund' to use for emergency repairs, decorating, new furniture whatever you wish which isn't to be touched for other spending. My husband and I nearly had a heart attack when we had to put a new roof on our flat in London. The girl who lived upstairs had had problems with the roof leaking for ages and our surveyor couldn't access the roof to check it's condition, so we didn't know. It was a real blow to us, especially as she wanted to get it sorted quickly and had booked the roofers! We managed in the end, but it was a real education. Make sure you know the pitfalls of your new property and any expenditure likely to be needed. We have also always had problems with boilers needing repair too - very expensive!

Good luck, but remember the longer you leave it, the harder it will be to make the decision. A house is your home, not an investment as such, but with luck it will be.