Upsizing mortgage in this economic climate

[sst1234]

Hi mumsnetters

Looking for perspective on an upsizing decision. You could say that I am needing to be talked out of it. I should add that I am not at all a compulsive spender, very careful about making purchases of any scale, let alone a house. Even the hubby is on board though he is usually even more sensible than I am.

Current situation is that by early 2020 I could be mortgage free using savings that I have built up painstakingly over the last 4 years. Savings were built with this intention. The plan was to move by late 2020 to a larger forever family home with a mortgage that could be paid off in 8-10 years at current repayment levels. Current house is a 4 bed semi detached, no garage and two of the bedrooms are singles. So more space, a garage, utility room would be nice. Basically a family detached house. Budget being around £400k-£425k - Yorkshire.

It feels like now is the wrong time to buy anyway given all the economic uncertainty with a possible no deal Brexit and/or GE. So, to then see a new build in our current area where we want to stay, for considerably more than I had ever intended to spend and to really really like it makes it uncomfortably tempting. This would be a true forever home, just affordable if not a stretch at £600k with a 25 year mortgage. Low interest rates make it possible and I would look to overpay a little and cut down the term by about 5 years.

I don’t see the home as investment, of course it to live in. But it feels like a very uncertain time and a huge huge mortgage commitment even though it’s affordable.

Am I overthinking it or is it really too big an upsizing leap in this climate?

I must say I’m nervous about taking on a big mortgage in this climate - my fear is that I would be buying at the peak of the market and prices may have dropped a bit in 6 months. Interested in what others think too.

No way, if it was cheaper maybe. But not in this climate and not a new build at that price level.

I personally wouldn't look to do that now. Maybe wait six months to see what happens x

I would; it's not like you're going to be selling again in the short term.

We are upsizing now; the economic climate don't change the fact that we need a bigger home, and the 25 years we intend to live in it for make the current circumstances just a small factor in my decision.

I think if you can afford the repayments, including if (when) interest rates rise, and if your income is secure enough/savings enough to weather storms, then I would. For a long term home you don't need to worry so much about peaks and troughs, as likely house prices will rise over the long term. If it's affordable and you really love it, well, how often do homes we really love come along? Be very careful with ts and cs of a new build - there are various scandals brewing. Look at all the details around land rights, leasehold purchases etc. I personally also don't trust the quality of most new builds but I appreciate this isn't what you're asking.

Interesting opinions so far, 50/50 down the middle.

If you need/want to upsize and can afford it, go for it. Why sit out the recession/Brexit chaos in a house you no longer want to be in, when you could sit it out in a bigger place or one you really love? We are looking to upsize also and although on one level that's crazy, on another we do need the space and don't want to stay where we are. I think it's working in our favour so far as there is so little on the market, our house got an offer at asking price on the first day of viewings. Ours is a FTB type home though so that will have made it easier. The house we want has been on for 6 weeks and we were the first to offer on it. We offered below asking price and are negotiating. It's more a midsize home. The sellers have personal circumstances which mean they must move by the end of the year. So again there are people who still need to move regardless of Brexit etc. No clue what will happen, as you know house purchases can fall through at any point in the process, but so far it has seemed all positive. Fingers crossed! I say go for it, if you're in England you can pull out at any point up til completion anyway.

I am VERY wary of new builds because a lot of the quality is shite
some in Whiteley have just been downgraded to EPC "E"

for an older house I'd say go for it
because you are buying a home not a financial product

Re new builds, they can be ok if they’re built by an independent builder but I’d stay away from the Barrett, Bellway types.

As others have said, look very closely at any leasehold situation and service charges. My friend lives in a new build estate and has to pay a service charge to maintain communal green spaces and a playground. Anyone can go on those green spaces and playground whether they live on the estate or not. Its like paying additional council tax each month but without any regulation of what can be charged - it keeps going up.

This is a development by a smallish developer. They only seem to do the more expensive house types. In this case, development of 5 houses, each with own electrics gates, double garages, all double bedrooms, pantry in the kitted out kitchen as well as utility room etc. You can see how this is a forever home.
We live in a new build (4 year old) currently, also built by a small developer. I agree, the larger developers are not so good.

How old are you now?
I personally would not move now. We’re different but I don’t think that I can go from being kind of mortgage free to having a 25- year mortgage if I was in the same situation as yours. I would prefer your first option.

36. The idea of being mortgage free or having a smaller one really appeals. At the same time, always had a picture of a dream house in my head.

We have just done exactly what you are thinking of (except it’s not a new build and closer to £500k than £600k.)
We were basically mortgage free - our savings would have paid off our small mortgage. We decided to take the leap when a dream project property became available. If prices drop we’ll be here long enough for it not to matter. We plan to be here probably 20 years.
It’s taken me a long time to adjust my mindset. I’ve always focused on paying off the mortgage and now we’ve got a whopper for 25+ years. However we are comfortable with the monthly cost and we can add a lot of value with work we have planned. Also it’s a fantastic home for the kids to grow up in.
We had to do it this year (was a private sale and the vendors had to move). I’d probably have waited a year or two otherwise to see how brexit pans out. I may feel differently if the economy goes to shit but I’m pretty pleased we’ve taken the opportunity right now.

UK interest rates will go nowhere above 2% in the next ten years
regardless of Brexit
regardless of which party is in power / coalition
fix if you want, but make sure that the fee is not ramping up the real rate

and yes, if you plan to stay put for 20 years, buy the right house
(or the right plot that you can extend the house on)

What if prices crash? We're upsizing for a variety of reasons but also not to be stuck...

It’s a big decision, who knows how the uk property market will react post Brexit, personally I think it’s possible that interest rates will rise in future, they have been low for such a long time.

Having been trapped in negative equity in the late eighties/early nineties and seeing very sharp rises in interest rates, I would act with caution.

What if Prices Crash
That only matters if you are trying to sell.
If you are still living in it and paying the mortgage, the "market value" is irrelevant

Mortgage rates will not rise because of the level of corporate debt in the west.
THe USA and the whole of mainland Europe are the same

A crash in values is less likely
more likely a Japan style 20 years stall

I also assume you did not bear the burden of the 80s!
I did.
I paid off my mortgage a while ago after 25 years of fluctuating rates.

there are no drivers towards higher rates in the UK

• please rad the financial press to see why

Our economy is tightly knitted to the consumer debt drug, that’s for sure. This makes rate rises very tricky for the BoE. That’s said, a general election could change things. A labour govt would likely bring with it rampant inflation and then rates would have to rise. All in all, that’s the biggest risk out there which makes buying right now so risky compared to anytime in the last 10 years.

The probability of a dip in the market isn't massively relevant as if you wait for prices to drop, your current home will also drop in price. The difference in cost between #mediumhouse and #bighouse at the peak of the market vs the difference after the market takes a tumble won't make a vast difference. You may lose out a little bit but not enough to fuss over.

The much bigger thing to consider is interest rates. Don't start any mortgage on the assumption that interest rates will stay low. They may well stay low for the next couple of years but there will be a big hike sooner or later. Check what repayments you could afford if interest rates were up by 5% or more by 2021. Don't borrow more than you are confident you could still deal with as interest rates spiral up and up.

A labour govt would likely bring with it rampant inflation and then rates would have to rise.
Why?

Sajid's spending plans based on borrowed money and Trump's spending plans based on borrowed money have not created inflation.

Trump's have - the deficit in the USA is rising madly.
And the level of government debt in the UK has doubled in the last 10 years
but inflation stays low
because there are no drivers of inflation and rate rises in the West now

what in Labour's policies would magic up inflation ?