Would I be mad to buy a house now?

[Cactusspike]

Long post, sorry.

Currently rent privately, not cheap but definitely paying under market value for the area so that could increase if landlord wanted to.

Work for the NHS, good secure job with opportunity to make extra income by doing bank shifts.

Single parent to 2, primary age.
My parents have helped me out with a deposit and I had an offer on an amazing house accepted last week. I had an AIP, all the signed gifted deposit forms and thought it was sorted. (Was going to do a 5 year fixed rate because this would be our forever home)

Fast forward to yesterday when I was informed that the lender has reduced their mortgage offer. Bummer. Broker has tried other lenders/options but because of the current financial climate she can't find anyone willing to lend what was originally offered a while back when AIP was granted and this leaves me with a 10% shortfall, around £15k.

I do have most of what's needed to secure the house but it's in my children's savings accounts/premium bonds, I could also earn quite a bit extra by the time exchange and completion occurs, but then I won't have a penny to my name, absolutely no savings.

FWIW the mortgage payment would be £10 more a month than my current rent.

I guess my question is, should I absolutely skint myself out and go for the house for 'security' or carry on renting with the real possibility of the rent increasing and increase my savings, rental is huge and old and expensive to run. Other house is a perfect house for us size wise and cheaper bills (I've lived in a similar one) there is nothing else on the market worth seeing at the moment.
My gut is telling me to go for it, I work really hard and it would be nice to have something to show for it but part of me thinks it's absolutely absurd to make such a huge decision in the current financial climate.

I could speak to estate agent and try to renegotiate purchase price but apparently they were offended by my first offer and have only accepted this one because the agent told them to be realistic.

Yes, you should definitely buy the house. We bought our first home in 2021 and it wiped us out financially in the short term. Two years on we’re back on our feet and able to slowly save up for home improvements.

You have a substantial deposit and by owning your own home you’re providing long term financial security for you children. However, I would speak to you broker about fixing for 2 years rather than 5 given how high interest rates are at the moment. Good luck!

Another definite, definite yes; as pp have said, if you can do it at current interest rates you’ll be so well placed when they come down again. And every penny you pay is towards something you own, not someone else’s assets.

For the minimal difference between rent and mortgage I'd go for it, especially if you're fixing for 5 years. Good luck!

Personally I wouldn't.
We brought last year paying the same as our rent.
With house prices set to go down and then I don't think increase much at all,
With rent you get flexibility and no maintaining costs.

I wish we hadn't brought. We wouthave had more money in our account to rent and save and then buy cash in the future with a smaller mortgage.

The only good thing is we don't need to declare childcare costs until we remortgage and hopefully will not have them anymore, but we only pay £300 of our mortgage compared to £1000 payment due to interest.

When we sell in 5 years as will need a bigger home or to change location we expect to lose our whole deposit so will in essence be £50k worse off, and that is best case scenario and presuming we aren't in negative equity.

Go for it then budget to re-establish your current saving options

Bit of an update

My amazing broker has managed to renegotiate the mortgage and the lender has agreed to the original amount! What a load of stress for nothing.

It's all forging ahead and homebuyers valuation is ordered for early next week so as long as that's ok I'm going for it.

Stormyforcast your post gave me a few things to think about, especially as prices and rates will be going down but as this will be our forever home I'm happy to ride the rollercoaster. I'm fixing for 5 years which probably isn't the best decision but it will mean my budget is fixed and I'll know where I am. I'm doing further qualifications so by the end of the 5 years my earning potential will have increased by about £15k per year and I'll be in a better position

Congratulations! You won't regret it.

That doesn`t sound right, the only way interest rates are falling now is if there is a very serious recession, in that case rents would probably fall very quickly, the media are now saying rental supply is increasing and there could be downward pressure on rents.

High? Historical average for base rate is around 7% or something?

Good advice, mortgage debt at the moment is very risky, the banks are definitely cutting back how much debt people can access though and that is a much needed move.

Op please don't go for the shorter term mortgage, 5 years of knowing what your repayments will be will give you stability to save.
It is NOT true that interest rates are definately going down, it is also not true they are unnaturally high...they have been unnaturally low for a decade in unusual circumstances but this will not return, My DH works in finance at a very senior level, I have been in the property market for 30 years, and we are sure about this.

There is much financial instability to come, rents will continue to rise as LL continue to exit the market in droves. This will not lower house prices noticeably, and although there is a modest fall in house prices the extreme shortage of housing will prevent substantial drops.

Buy for the security and fix for as long as you can, once in, forgo improvements and save , save, save.
Good luck

"This will not lower house prices noticeably, and although there is a modest fall in house prices the extreme shortage of housing will prevent substantial drops."

Not sure how that would work because no one viewing houses is homeless, they already live somewhere, if they can no longer get the loan to buy the bigger/better house they will just wait for house prices to come down?

Where supply and demand really counts is with supply and demand for mortgage borrowing, as we saw yesterday with the U.S figures for mortgage applications (lowest in 30 years) when the debt gets too expensive people just stop borrowing and keep on living where they already live.

House prices now have to fall to a level where people can borrow and afford the debt payments, it will be painful for some but better for society in the long run.

Not sure how that would work because no one viewing houses is homeless, they already live somewhere, if they can no longer get the loan to buy the bigger/better house they will just wait for house prices to come down?

Our population is increasing year on year, more people need to be homed. People are teaming up with others to buy and taking second jobs, there will be those who will find ways to buy.

So many times in my lifetime it has been said that house prices will fall x or y it has only happened for a relatively brief period then risen again.
People who take that view have been priced out, if you look at any house price growth chart over the last 40 years there is an overall rise despite some drops along the way.
The difference now is that social housing is at its lowest level ever, due to the sell off of council houses and complete lack of rebuilding.
Alongside the 250,000 LLs exiting the market last year, reducing rental supply which forces up rents.
Even remaining LLs are pushing the hugely increased costs of running properties on to their tenants due to ill thought out Government policies.
Renting is in serious chaos, and will be for a few years at least, renters have never been as vulnerable as they are now, ( or paying as high rents) making owning, even in a less than ideal market, a much safer option.