To park this life goal for now

[FlyingSoap]

TL,DR: house buying in current times !!

Everyone talking about how rates are soaring. An article I saw yesterday saying FTBs will now pay over 10k in interest on average was the final straw. Apparently your actual equity would only account for 30% of the astronomically large payments. We have a deposit saved away in ISA but would still need a 95% (possibly 90) LTV so is a high risk for negative equity(owing more to the bank than the value of the house). This will matter and might come back to bite us as like most (all) people getting onto the ladder we can’t afford the home we’ll live in forever straight away, sadlynot practical for us

We rent in a beautiful village where everyone knows one another and there is zero risk of being evicted, and payments will only go up by nominal amounts. So lucky for this.

Is being a homeowner worth it if you’re compromising on other areas of life ?? It’s always been my goal but lately I’ve been thinking we might as well enjoy life a bit more rather than being so house poor and maxing out our budget. A low deposit and an extremely long term is essentially renting from the bank with all the drawbacks of property maintenance, right ? Just sounds like the opposite of secure to me

Even thinking now DH and I could make the best of our little home despite being rented and start our family here given we would then have a larger amount of disposable income to help buffer reduced income over maternity, then later childcare fees (although we will only need one full day of paid childcare anyway). We earn equally and I do intend to go back to work FT and love my job. Maybe this is illogical as lenders would then lop more off our affordability for dependant, though DHs salary should be on the rise over the next several years with commission and enhancements anyway.

I do see my attitude might be wrong but trying to be considered based on the research I have done, and other threads read on here

I appreciate this. Are there any specific ISAs you’d recommend? Nobody tells you about the risks of property ownership. We can’t buy a starter home with a 5% deposit as this would get us a really, really small house which would be fine if we knew we’d make profit but nobody can bank on house prices continuing to rise anymore - not with these interest rates!

Would echo what @Travelfan2021 said as it’s the exact same for us

An ISA is just the wrapper for your investments, but the assets (stocks, bonds, funds, ETFs, etc..) you choose to hold in an ISA or a SIPP for that matter depend on your age, risk appetite, and how long you want to hold the asset for. Claer Barrett from the Financial Times has a great personal finance podcast that’s free and is a good play to start. I think it’s called Money Clinic. The Vanguard, Fidelity websites will
also have some good content around investing.

Most providers will have Lifestyle funds that are well diversified across assets, geographies, duration, risk. These can be a good place to start.

The other option could be to look into seller financing for a property (although I am not sure if this is a thing in the U.K.). Usually it is someone who really wants to sell, I think those deals are quite rare, but could be worth having on your radar if you find the right deal and want to go down the home ownership path.

Thankyou this is useful. I’d never even thought of this before as an alternative for now but may well be smarter

I should add, I think the fact that buying is usually the done thing is making me feel as if we should perhaps more than anything else.

Why do you need to make a profit? If house prices stagnate, then the next rung up the ladder will be more achievable.

Personally I believe if U.K. house prices tank, then the stock market won’t be fairing much better. Maybe if you invest in global stocks/funds and the wider global economy dodges a large recession, then maybe it could work out. But personally it feels like everything is interconnected nowadays. Either you are fully out or you are fully in.

@Travelfan2021 ultimately a landlord is a business. I can’t imagine there are that many landlord who set their rent significantly below the market rent. Sure there will be some but it’s certainly not going to be common, for pretty obvious reasons.

It’s if they don’t stagnate, what if they fall? Just using random figures

200k house, 5% deposit. 190k owed to the bank over 35 years. At current rates that’s over 1000pcm. House prices fall by 10% (as forecast, with inflation). Suddenly you can only sell your house for less than 180k and you owe the bank more than that. Problem.

Affordability checks are bullshit because they are one size fits all and don’t take into account your lifestyle. You can fail an affordability check for a mortgage much lower than current rent you have been successfully paying for a decade.

Not sure what you mean. We have an agreement in principle and know what we could borrow it’s more we’re reluctant to atm with the sky high rates

Our mortgage will be almost doubling at this rate, but I don't regret it for a second; our mortgage payment isn't just a bill, it's an investment, we are building equity, interest is only part of the payment. It's also our stability, we are not at the mercy of a landlord.

But we bought after having kids, having kids doesn't have to be the cliff edge that means never owning a home. I do understand pausing at the moment and seeing what happens to the market, don't wait too long though, there's been a reason not to buy since 2016.

I would (and did) put home ownership above holidays and days out

You said you are good savers but you can't be if you have only got such a low deposit. Presumably you must earn about £30k each if you are being offered that mortgage?

It's up to you whether you buy or not and you are definitely talking yourself out of buying, but I disagree that it's the same as renting from the bank for years, as property should increase massively in value if you buy well whereas renting gives no return at all.

If we’d been able to buy two years ago then yes property would massively increase in value but now it’s actually forecast to massively decrease in value! You may be right and it’s possible talking myself out of it but I just can’t see the sense in it. Feel happy knowing we own a very small house in 35yrs time - but if we were house poor and had no money to enjoy life, what’s really the point in owning a house in decades to come?

Thanks for this perspective :)

@Motheranddaughter this is understandable, for the security element of course. Though if you’re already in secure housing I’m not sure what sort of a difference it makes at the moment other than the immediate obvious hundreds of pounds less in your bank account each month

You wouldn't be poor for the whole term of the mortgage, it should decrease as you pay more off, and you can over pay. Your rent will only increase. And yes it is a good thing that you would own a house in 35 years as it means you won't be paying rent from a pension.

You make a good point, that was the thinking we had up until recently but now with rates jumping it seems like keeping an eye on it would be better for now

OP, I feel for your predicament. I’d plump for staying in the affordable secure rental for now. Try not to predict your future finances the way you are- you might end up with multiples, or a child who requires specialist care, your current planned childcare arrangement might fall through or not find a childcare place which will only take a single day week. Conversely the government funded childcare might be in place and might cost you nothing!

You’re so right, I think I do need to slow down and try to forecast for the future too much which is silly really given any, all, or none of the above you mention might happen! Have to take things as they come, I suppose, and just do what is right at the time. Most people wouldn’t think into these things at all I guess

I suppose in other countries it’s the norm to rent too

For anyone who’s replied who bought after kids, may I ask how did it impact affordability?

@FlyingSoap childcare bills can be (and usually are) factored in affordability (when we bought it 2017 NatWest disregarded it, but it was included with Nationwide when we upsized a few years later). We didn't buy until our eldest was in primary and youngest getting 30 free hours, it would have been difficult paying our mortgage with childcare (our rent was cheaper). But dependents also reduce how much they will lend, im not sure to what extent.

That’s good to know thank you

This is true but some rent from family or there’s HA properties