Would you give up trying to buy a home?

[Patapouf]

We spent so long looking for somewhere to buy (slim pickings in our budget in this area) that rates have now gone beyond what we can justify with all other bills rising by so much. It is affordable if we are more sensible with spending but not a huge monthly buffer if one of us lost a job. Plus the idea of hundreds a month just in interest is infuriating.

Mid 30s, first time buyers in a rented too-small house with yard rather than garden. Absolutely miserable and shit for the kids, but renting anything better costs even more than a mortgage would be. Can't move out of this area because of our jobs and caring responsibilities.

If we wait for rates to come down, prices will have gone up and we were already at the top end of our affordability to buy an ex-council terrace anyway.

Obviously we can continue to save but that won't be enough when the value of our current deposit withers due to inflation. Likely also not going to be able to get a 25 year mortgage term if we leave it too long.

Would you still buy and just pray interest comes back down to 2-3% by the end of the fixed term?

I know people don't agree necessarily but the way I look at it is to just compare rhe amount of monthly interest on mortgage and rent. Most people are better of buying in the long run I believe.
However, this served us well - don't push to your max affordability and buy somewhere you are happy enough to live for minimum of 10 years if necessary.

We could definitely survive ten years in the next place but I'm not sure we'd manage interest rates of 10% if they climb that high. I don't even know what the political solution is or when we can realistically expect them to come back down.

If I was told it would be another 12 months I'd hold tight but what if its now or never and the only way to get on the ladder is sucking up these high rates?

What kind of rate can you get now?

It's unlikely rates will go as high as 10%. It's also unlikely they'll go back down to 2-3% in the next couple of years.

There is such uncertainty and market turmoil that nobody can really tell you what will happen. If they say they can, they are lying.

It may become increasingly difficult to get a mortgage offer as the economy worsens - and that is almost a certainty now as it's been baked in by what's happened since 2016 and more recently - so if you have a mortgage offer in place now I would try to buy before it expires, personally. Otherwise you could be stuck where you are for years.

You say you have enough slack that on current rates you would struggle if one of you lost their job. I don't think that's the right test. Almost everybody with a mortgage needs their jobs to pay for it. Single people have mortgages too! By your test they shouldn't. I mean, if you lost your job you'd go and get another wouldn't you? There are plenty available atm. Or is your specific sector at risk of redundancies etc? In which case it makes sense as a reason to think twice.

Once you have a mortgage, when your fixed rate expires you can generally move to another fixed rate deal with the same lender without doing all of the affordability checks again as long as you aren't borrowing additional money. Although obviously rates will likely have moved further upwards by then. How long is the fixed rate deal that you are considering using?

Also don't forget that if interest rates rise significantly, rising rents will follow. Landlords will have to feed that cost on the buyers. That will feed through more slowly but will happen in the next 1-2 years. So then you'll have even less scope to save if still renting.

It is an awful situation OP for everyone.

I'd also however make sure I budgeted for robust critical illness insurance so your mortgage is covered if one of you becomes to unwell to work. And keep some money back from your savings so you have a buffer of a couple of months or pay in the bank, not pour every penny into the house purchase.

5% ish I think. Crap!

Lots of good points, thank you.

I think I'd rather suck it up and pay through the nose than plan on waiting it out only to find that I'm stuck and my only chance has been and gone.

I meant landlords will have to feed that cost on to *renters. But sure you gathered that!

I really feel for you, it's a horrible situation to be in and making such a huge decision largely in the dark is scary. I guess all you can do is look at probabilities and on balance if you have a 5% fix in place right now as a FTB all I can say is that if it was me I'd go for it. At least then your payment is locked in, unlike with renting, when it could rise any time. I would fix for as long as possible just for certainty but we all have different risk appetities, and obviously that also depends on other factors: expected pay rises/ promotions in the next 5 yesrs, how high the LTV is and whether that would change significantly after 2 or 5 years of repayments, etc.

Rates will not be getting significantly lower for a long time IMO. But that is just my opinion - based on the economic data and the fact that the BOE will not want them to go back as low as they were anyway, I'd think 2-3% base rate would be the longer-term target if things got better but that may take years - but nobody has a crystal ball. I hope you make the right choice for you. So stressful.

OP we’ve been trying to buy for SO LONG now. People kept telling me prices would come down and yes they might/are but now that interest rates are going up these same houses are now more expensive month to month. Houses here are so few and far between that actually people are still laying crazy prices and crazy interest on top.

I really don’t know what to do now. It’s a horrific situation and anyone who isn’t in the situation doesn’t get it. We are currently living in a house that is far far too small and doesn’t allow us the lifestyle we want to live. There were so many things that we were going to do when we moved that now feel like they’ve passed us by. It’s so fucking shit. I’ve been actually massively down about it recently.

I suppose the only up side to it all is that had we already moved we would be stressing now about the interest rates when it came time to get a new deal.

@Housebuyingistheworstthing sadly this is the kind of thing often spouted by people who don't understand economics. Of course eventually there would be a dip and prices would go down for a while. But when that happens it's always because the economy is in a terrible state and that means higher interest rates/ people have no job security/ banks won't lend money or some combination of these meaning it doesn't benefit FTB at all, it makes it harder for them!

Only cash buyers benefit. People already rich looking for second homes or investment properties to let.

Anybody telling you a house price crash would be a boon to first time buyers is at best ignorant and at worst a liar. I am sorry people misled you to think that would help. It's always terrible for the country and especially people trying to get on the housing ladder when the economy tanks.

Nobody knows of course, but - I expect that interest rates will normalise in 3-5 years. This doesn’t mean they’ll drop to the lows we’ve seen (that’s not normal, that’s very cheap). But it does mean that if you can fix to get over the immediate volatility - and, importantly, still afford to keep up at least that level of repayment indefinitely (25 years might as well be indefinite!) - you’re probably ok. Personally I’d want several hundred pounds a month “wriggle room”.

Yes @RainingRubies, you’re right. In fairness I think people are just trying to think of something to say and trying to make me feel better but it doesn’t help in the slightest. We’re not FTB and I really do feel for those who are because it’s a million times harder for them.

Thank you ❤️

It's funny to think of 3% as desirable after the 1.5% we were looking at earlier this year! I really don't know enough about economics and the housing market to have any confidence in my own decision making ability at the moment.

I used to think house prices and housing stock was my biggest problem. I can't believe it's taken over 15 years of adult life to get to the point where we could buy only for this to happen 😂

How dare millennials want to own their own home with space for a blooming tumble dryer.

Ahhh sorry I misunderstood. But equally awful to have bought a starter home as a first step and then be hit with this.

The rates in the last decade have been so low, that was never going to last. But it's also hugely irresponsible that those running the show in the UK have created a sutuation where they rocket up so fast - and above what was necessary if the economy had been managed properly (no Brexit, proper long term energy security and food security policies, etc).

The impact on so many families will be devastating.

It's funny to think of 3% as desirable after the 1.5% we were looking at earlier this year! I really don't know enough about economics and the housing market to have any confidence in my own decision making ability at the moment.

It is such a shock to everyone because the Government through its ongoing mismanagement has left the BOE with no choice but to raise rates very fast and this will now likely accelerate in the shorter term. I hope you can find a way through to getting a decent rate locked in for the next few years by which time one would hope things may calm down and begin to improve. But it's so hard to know because the level of mess in the UK and internationally is unprecedented.

How dare millennials want to own their own home with space for a blooming tumble dryer.

The audacity, right?

And then the flip side of it, the many threads on here recently saying anybody struggling to pay their mortgage or with costs going up must have mismanaged their money. As if life never chucks a few curved balls at us in a row that eat up our contingency plans.

Don’t forget though that the older you are the shorter your mortgage term will be. If you’re 25 that’s not a problem but if you’re late 30s waiting 5 years could start to affect affordability by restricting your term.

Gkod point. Although Ms Truss' next move may well be to raise state pension age to 96, purely to help out FTB with longer motgage terms, of course.

Or perhaps introduce those multigenerational mortgages some countries have where you can pass on the debt to your children. 🤣

Yes, age is definitely a factor in the decision. Especially because our first purchase wouldn't be our 'forever home' hate that term

In your situation I'd be weighing up a tracker.and getting a short term fix at the lowest rate I could. Have you spoken to a mortgage broker?