First time buyers have got it bad right now, haven’t they

[Blueberreh]

We are first time buyers with deposit saved. We were looking at houses but we have stopped now and are just going to play it by ear. Soaring rates mean we would be paying many hundreds of pounds more each month than we currently pay for our secure tenancy, just to say we own a house after a very long term of 35 or 40 years (which is what it would need to be to make repayments affordable)

The answer is not to buy a starter property. It’s not viable anymore to do that if you have a family or want a family. A studio flat or one bedroom place is not a wise purchase as house prices are forecast to fall and then what do you do when you find yourself in negative equity at the end of your 5 year fix? Trapped there unable to sell, and/or onto the standard variable rate. Not to mention the fact you are 100% responsible for maintenance, repairs and everything to do with the property.

We have the average joint combined income living in a relatively inexpensive part of the country and are priced out the market. To give you an idea a house that we were looking at 3 weeks ago is still on the market, 3 weeks ago our monthly repayments would’ve been £180 less than they would be today at the new rates. That is how quickly things are rising.

We are lucky in that we can stay where we are, 1 and 2% rates are likely a thing of the past but even 3.5 or 4 would be manageable and affordable. BoE seem to think this will be 2025

For now I must think practically, having £400-700 less in our budget every month due to interest rates would seriously affect us. We would be stretched to the limit. We don’t have children yet but hopefully will have soon, and even thinking of maternity leave when I’m on reduced income… we would be sleepwalking ourselves into a position of hardship.

I pity everyone, truly - those looking to remortgage, those trying to upsize and of course first time buyers in our identical situation. If you’re a first time buyer what are your thoughts, are you buying anyway or sitting tight for time being?

First time buyer - totally agree with sitting tight.
Everything is so unpredictable. I could afford it at the current rates, but would be tight and would be paying more than my current rent. I am holding out until rates are around 3%. But I don't think I'll be the only one.

3% would be a dream right now wouldn’t it! It’s just so annoying especially when you’ve saved for this.

At least you haven't actually bought.

Those with renewing fixed terms or those that bought in recent past with the price increases that went extreme for no apparent reason. I worry for them because we experienced negative equity in the late 80s/90s ourselves

I know! I don’t think I’d sleep at night. It’s funny actually as someone got an offer in before us on the last property we viewed, if they hadn’t we might have offered and be applying for a mortgage right now. Was sad at the time but perhaps everything happens for a reason.

There’s never a good time to buy. Lots of people want house prices to fall, but with that often come with high interest rate rises. Once interest rates go down, house prices will rise again.

It's true a house buying life is capital and interest. Terrible if you end up paying high capital and high interest for the mortgage life though. That's why I think there should be mortgage lifetime rates.

Both my kids are looking. Son had to stop as his relationship split but daughter needs a place really with her partner. She works in the industry so she will have some idea as to what's happening on the ground. She was saying the stress testing for affordability was ramping up.

True but hopefully there will be a cheaper window in the middle of that. 2013-2020 was a good time to buy (aside from brexit malarkey)

It's definitely tough yes. Stick with your secure tenancy for now, but be ready to move swiftly when interest rates do come down a bit.
Over the long term, house prices always go up. Even when there's a drop in the market, it recovers a few years later.

However, it's worth going for it when you can. In the scenario you outline in your OP where your repayments would be £180pm more than your current rent - work out what your equity will be after 5 years of that. You'll have paid off a small slice of the mortgage yes but also if house prices have risen so that the property is worth £10k more then you have made a profit. So long as you don't buy at a peak just before a crash, that will work well for you.

The people most in trouble are those who stretched themselves to be FTB in 2021 and whose 2year fixed rates are ending now.

But if you buy a larger home, there would be the higher mortgage and higher interest payments. I am so glad we didn't buy the 400k 3 bed house in commuter land cos we would be paying season ticket costs plus the costs of a car. We now use public transport and can whack an extra £2k onto the mortgage every month. So we would have £250k left on the mortgage balance when time comes to remortgage in 2024 (which is 2 X combined income so not too bad even on 8% interest rates).

Its a 2 bed flat and we would like to upsize to a 3 bed flat, but we also know we are very lucky to have what we have in London. And many people have 2 children in 2 bed flats in London

We’re not in London and there are few flats and starter properties around here, often snapped up by landlords for BTLs. We have two cars which we rely upon for work so makes it harder to live in a flat where there is no parking. Plus the negative equity risk which is heightened when you know you’ll have to move in future + the legal fees each time and stamp duty. Buying small is no longer practical.

I don’t really agree cuz I think everyone has is hard really.

Those who want to upsize but are looking at negative equity on their current homes.

Those who are coming out of their fixed terms.

In a way first time buyers have it a bit easier at the moment as they can at least wait and sit it out. As rates increase house prices will start to fall. Definitely seen that in my area at the moment.

In your position if wait it out six months and reevaluate. There’s nothing wrong with having a long term atm either to get lower monthly payments. I see increasing the term as a useful tool to make things more affordable in the short term. So fix for five years and reevaluate after the time period to see if you can reduce the term which hopefully you will as your career progresses and you earn more money etc.

To summarise I think everyone has it hard atm. We bought our house october 2022 and part of me is annoyed as if we waited six months we’d get things a lot cheaper in our area :( but hey when our fixed rate ends in 2027 we’ll reevaluate our financial situation and see what the most appropriate term is for us then to make the payments affordable.

@ActDottie i did say that further on in my
post :)

Oh great - another thread from the OP about virtually the same thing but under yet another NC. I'm not sure what you want people to say!

Eh?

My mother in law was in a 1 bed flat with 3 children from 1989 to 1996. A lot of people lost their homes in that time frame because they overstretched. My mother in law didn't even though her husband lost her job and she had to go freelance with two and later three babies. In the end she managed to upgrade to a 3 bed house in her area of north london using the equity from the flat (which she sold at a loss) and she still lives there today. I am sure it was painful to live in a 1 bed flat with 3 kids but i think worth it in the end, she said the house price crash was what ensured that she could upsize and i guess the relatively cheaper flat meant that the kids always had a roof over their heads even though they were very small. I hope to do the same and upsize from my 2 bed flat to a 3 bed flat perhaps in 2025...

Its really a personal decision. but i think for a first property (and certainly if you are early in your career- I was 27 when I bought my first property), the priority is being able to pay the mortgage. If you can't pay the mortgage, you wouldn't want to have children either. i think a second bedroom is good, but I think stretching for a family sized home now (3+ bedrooms) for your first property is a luxury imho. Unless there are 20% price falls, then you should take advantage of the fall in house prices.

We decided to go for it earlier this year at 4.6%. I am glad we did as i think it wont get better in the near future. We got the location we wanted but went for a 2 bedroom house rather than 3-4 knowing that we will do an extension in 5 years time so that worked for us.

Oh that’s great that you’ve found one you can extend. If you can do the work cheaply or by yourself all the better! That’s a good compromise for people isn’t it, I think.

Just don't put it off too long. The longer you leave it, the shorter the term of the mortgage available. If you want a 35 year term, you need to be in a house by 33, if you want a 40 year term, you need a house by 28. Unless of course you're prepared to gamble and mortgage past state retirement age.

My son is buying with his partner
made an offer on Sat and it was accepted straight away -

3 bed 2 bathroom house with a huge garden room at the bottom of the garden with electric lights and heating

he has a rate of 5.1 fixed for 5 years
and a 70k deposit
he’s buying a house that he could stay in pretty much forever and it’s been extensively remodeled so they can literally move in - they don’t have to do anything to it

They already have the majority of the furniture they need as they have been renting a flat so they don’t need that

I’m paying removal cost and solicitors fees for them

The house will be around 250 a month more than his rent but he’s got very cheap rent st 950 a month and he can afford it on his own
And the bills and council tax will be cheaper as at the moment his water is on a commercial rate for the building his apartment is in
so it should even out .

They can afford it on there own quite easily but they are planning on taking in a lodger and have one already who they know really well & needs to be in our city in Oct to start his job and my sons partner works as cabin crew and there are always people needing lodgings or a place to stay when on courses

i said there is never a good time to buy a house buy like having a baby just got to hold your nose and jump

but the house is perfect for them and I doubt if they would get something like it again

That’s really great for your son, sounds like a stable long term home too and what a great deposit! I hope they’re really happy in their lovely new home, bonus that they don’t have to buy furniture too. I guess that’s an advantage to renting before

You really shouldn't buy any property OP, your understanding of how to benefit form property ownership is fairly limited.

Property (historically) will always rise, it might dip occasionally, but it will always rise in value. Renting is literally a waste of money.

A mortgage payment has two elements. Each payment you make is split between both you and the bank. The more you pay, the more you save.

Interest rates have been artificially low for the past 15 years. The "misery" being "suffered" by mortgage payers in the current round of rate hikes doesn't really affect the majority of home owners. 4-5 % is the historical norm. So 5-6% rates are just perfectly normal rates. No need to panic.

I'd you rent all your life, what will you do when you retire?

You buy a home, not a house. That's the "value" in paying a mortgage.

Falls in house prices (if any) will be a VERY temporary fluctuation. Liquidity isn't an issue. And if prices fell YOU would rush out to buy, and so would everyone else in your position. The market will be flooded by buyers and prices will rise again. Home owners are used to this and just sit out the dips.

People who buy what they can afford don't have to worry about interest rates. Those who stretched themselves at 2% will get bitten. But don't for a minute think all mortgage holders are crying into their weetabix about rate rises, the majority are not concerned.

Don't wait to buy your home. What would you be worried about negative equity?

Are you planning to sell it again soon?

Ten years from now you'll be in a far better financial position by paying a mortgage than you would be I'd you keep renting.

What makes you think your rent will stay static in the face of rising interest rates....?! If fewer people buy, rental demand increases even further, meaning rent does too.

Your approach is pretty simplistic, though I so agree it must be a scary time consider buying. You will never actually predict the market though, nobody can.

I thought the dibs were when you should try to upsize (providing you have been overpaying and hence have enough equity).

Renting may not be a waste of money if you were paying £1k per month and house prices fell £50k in two years, you are still better off waiting. The problem is not everyone is a prophet and not all areas fall equally. at some point, there is a balance.

Depends where you are, I’m in the SouthEast, we first bought in 2015 and the market was crazy then with houses being bought before you could even view and prices going in bidding wars over asking price. There may have been a very small window of cheaper houses and less crazy market before that but then it was harder for first time buyers to buy as banks really tightened up on their affordability criteria so lent less. As I said, there’s never a good time (in the South anyway)!

But don't for a minute think all mortgage holders are crying into their weetabix about rate rises, the majority are not concerned.

I own my (mortgaged) house, I can afford rates to go as high as 20% before it gets to be a real problem. I STILL am concerned about rate rises because the higher they get, the more money I have to spend on interest - that can't go to do other things, such as over pay into my pension.

My money is better off with me than with the bank, but rate rises mean the bank must have it.

Those not concerned presumably don't have anything else they'd rather do with that money?