Moving House advice in current climate WWYD

[FridayThirteenth]

Namechanged so I can post more detail.

Firstly, I know nobody has a crystal ball so it's impossible to really say. But I'm feeling quite nervous about our situation and not sure if I'm over reacting (DH thinks I am).

So, we live in a lovely flat in a lovely area of SE London, that is starting too become too small now we have 2DC. Already extended to max capacity. Unfortunately we had some lingering issues with the extension (eg leaking roof) that we have had to put right before we could consider going on the market. We're now at the stage where we could sell without worrying about surveys etc.

However the plan was to wait until Spring as a better time to sell and it enables us to save a bit more of a nest egg in the meantime. Our fixed rate ends in August so that's really the motivator for sorting it out before then.

Obviously over the past 6 months or so the property market in London has cooled hugely. As we are upsizing this makes me worry. We can afford to pay more on a mortgage, but I've just read some really helpful advice explaining exactly why borrowing close to your limit on a low rate is a really bad idea, and why paying higher interest on a smaller lending amount is better even if you pay the same amount each month overall (particularly if you overpay).

So the quandry is what to do. Do we bite the bullet and try to sell now in the hope we get ahead of prices tanking?

Or do we wait until Spring and accept a much lower offer, higher interest rates (potentially) and maybe not much on the market to choose from.

With either option the risk of coming to the end of a fixed rate mortgage 5 years down the line with higher interest rates and lower value property is a real possibility (or maybe I am all doom and gloom?). I know we can try to mitigate this as much as possible but we need to add £150-£200k to our mortgage to manage to upsize and so I'm getting fear.

Should we just sit tight and live in our cramped flat instead?

Or should I listen to DH who says we just have to go for it in the Spring, make sure we can still save a little/overpay each month and deal with the situation 5 years down the line at the time as it may be fine?

I'm so terrible at making decisions at the best of the time, and opinions and wisdom would be helpful!

[Knittedbreasts]

I would sell now, but once I want to move I have to move.

[FridayThirteenth]

Yes I am a bit like that, I have the urge and am obsessively Rightmoving. DH wants to wait and get more in savings before we start paying more on the mortgage each month.

It's just the unknown aspect of waiting that I have trouble dealing with

[theknackster]

I would have thought that a cooling market suits 'upsizers' as the differential between what you are selling and what you are buying should shrink (assuming an even percentage house price drop) - you might get less for your current property, but you end up with a smaller mortgage anyway.

But this is the UK property market, so who knows!

[EdwardTheBlueEngine]

You sound very clued up OP, and yes borrowing to your limit at what could be the peak of the market, with interest rates at record lows, may not turn out to be prudent. People tend to focus on the fixed rate term of 5 years etc. forgetting that they will be saddled with that debt for decades, and at the mercy of rate rises in 5+ years time. Also the potential for being unable to re-mortgage if negative equity is an issue in the future.

In your situation I would try to sit tight if you can, and your next step on the ladder might just become more affordable in the next year or so. I can't see prices in London rising too much in the next few years, so the risk of losing out is low. I would choose a cramped flat above the stress of high debt and risk of negative equity but I know the "prices always go up" brigade will be here soon and will have different advice....

[FridayThirteenth]

Yes I think that's true theknackster. It's just more the taking out a bigger mortgage (even if the jump isn't as big as it would have been) on still a fairly low rate. The rates can only go one direction - not so much of an issue if property prices continue to rise. But if they continue to fall it could mean a huge hike in mortgage repayments in the future if the LTV is the same (or worse) due to the fall in property value.

If we didn't have the fixed rate coming to an end I wouldn't feel such urgency. But I feel like I have to make a decision - commit to a couple more years at least in the flat and buy when prices may be lower (but then again may not) or just go for it and take the risk.

[FridayThirteenth]

Edward - There are issues with the layout of our flat which makes staying put whilst our kids get bigger a bit of a depressing thought (even for a couple of years). The extension was a short term fix to our space solution due to getting outbid on everything when we tried to move in 2013.

Obviously didn't consider Brexit or anything like that when we extended and thought it would be simple to move when we needed to!

[EdwardTheBlueEngine]

Ah yes, kids do have a habit of complicating matters somewhat! If you really have to move then I personally would still wait as long as you can (even if that's just Spring) rather than moving when prices are potentially teetering on the edge. You can always go onto a variable/tracker rate whilst you are waiting.

Yes interest rates are rising but I think most mortgage products will already have this rise factored in, as swap rates rose in anticipation. So you might find that mortgage rates aren't significantly higher in spring than now.

[EdwardTheBlueEngine]

Sorry should have said interest rates are "likely" to rise, as no guarantee Carney will actually raise them in November.

[FridayThirteenth]

That's a good point - I don't know much about mortgages but can you go on to variable/tracker and then take out a new mortgage product whenever you want without penalty?

I wonder in terms of deposit what is enough to mitigate price drops without going into negative equity? We would hopefully be looking at about 25% so maybe that's enough?

[Baxdream]

How about you overpay your mortgage now (maximum 10%). You’ll be amazed what difference it makes plus it makes more sense than savings.
Then when you come to sell you’ll be on your way to getting used to higher payments and you’ll have knocked your current mortgage down.
I’d move in the spring still

[JoJoSM2]

I'd want to move. Two adults and two children in a two-bed sounds really cramped. If you're worried about maxing out the mortgage, could get a decent house for less? For example by moving to a cheaper area or getting something unextended that you could add to in a few years?

[Baxdream]

We’v just gone onto a nationwide tracker whilst our extension is being done and we’re then going to fix in the new year when our work is finished

[FridayThirteenth]

JoJo- it's a 3 bed flat so not quite so cramped in terms of sleeping space, but only 1 open plan living area which is starting to feel very claustrophobic.
We were saving rather than overpaying at the moment so we have a decent pot of savings to mitigate and job losses etc in the future. I want to get it up to cover about 6 months if we can.

Can you tell i'm worrying about the future!

I feel better about waiting until spring now.

[EdwardTheBlueEngine]

If its only for a few months you may be better just dropping onto your standard SVR for a bit, as remortgaging will have fees associated with it, valuation etc and might not be cost effective.

[FridayThirteenth]

Oh and in terms of getting somewhere for less, both DC are at school and we have secondary school applications in a couple of years so are keen to stay relatively close to where we are now

[FridayThirteenth]

Good point Edward

[JoJoSM2]

Oh, 3 bedrooms doesn’t sound that small even if there’s only one living area. In all honesty, I wouldn’t forgo having a pot of savings/investments and reasonable pensions to move. Especially if it entails having almost max mortgage that will only get more expensive. You can always give it 6 months to re-evaluate as the market falling will work in your favour.

[Whatthefoxgoingon]

Whatever you decide, make sure you read the remortgaging guide on the moneysaving expert website. It's long but well explained.

Linky: www.moneysavingexpert.com/mortgages/remortgage-guide

Personally. I'd move. You're moving because of need, not want.

[name1change12]

OP - I feel your pain & am very anxious too. Ideally I would like to move but super scared about taking on a lot more debt. Plus unless we move out of SW London it won't be our forever home so it's not like we can ride it out. Surely what I buy now is not going to double in price like property has over the last 5 years?

[another20]

Would selling up now and renting for a couple of years help? Then buying when the market hits the bottom....?

[name1change12]

Has anyone fixed for 10 years as unsure if that is a sensible thing to do?

another didn't think of that but would be scared to get off the ladder if that makes sense. Was debating about renting ours out & then renting elsewhere.

[FridayThirteenth]

I know categorically DH wouldn’t go into rental. He’s not convinced there will be a massive drop.

Also not keen at all to rent out our place and rent somewhere, I think being a landlord in those circumstances could be a complete nightmare.

I’m very worried there will be but who knows really? Maybe prices will just stagnate for a while in which case probably better just to get on and move.

Thanks for the advice re money saving expert, I’ll have a good read of that.

[FridayThirteenth]

Oh and name change, my Mum has fixed for 10 years but that’s her entire mortgage term so a bit different I guess!

[TheBadTemperedLadybird]

Move, it's about how your life is now, it'll make you happier.

If interest rates go up it'll be gradual and by small percentage points at a time imo

You are young and your salaries may increase

Good luck

[TheBadTemperedLadybird]

Btw we recently remortgaged and the stress tested us i.e. Checked we could afford it at 12% which was madness given that most people will be screwed at 12%