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Original poster

talk me through the house price crash please

87 replies

ruty · 06/07/2008 16:03

OK so we are selling up. We have offered on a house, about 8% under asking price [offered lowered initially and was refused] in a very good area with good school, etc. But we are really mortgaging ourselves to the hilt to get the house and will have to remortgage when tracker rate ends in December [taking mortgage from current property and borrowing more]
Are we being completely stupid? Our thinking is, we will spend an awful lot of money in the next two years if we rent a house, about 30 grand all in all, and we will have to pay 8 grand in early repayment penalties if we sell and pay off mortgage now.
Any ideas if these losses now will pay off if we wait for a couple of years to buy? Very confused at moment. We are borrowing a lot and I am very nervous about it, but then again if we don't buy we have to lose money immediately. Will all areas go down hugely if there is a crash or just not so desirable ones? Anyone with a crystal ball welcomed!
Really, I rather worried, could do with some advice..

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SqueakyPop · 06/07/2008 16:25

I'm surprised that the bank is letting you transfer your mortgage to a new property.

Original poster

ruty · 06/07/2008 16:38

why?

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RubySlippers · 06/07/2008 16:42

if you are in it for the long haul then i think things will pick up again

perhaps not to the crazy levels they have been at, but they will go back up

buying is usually a better bet than renting as well

we have just extended our mortgage and had no issues getting money from the lender, so am intruiged as to why squeaky is surprised ...

peanutbutterkid · 06/07/2008 16:46

Not all mortgages can be transferred, ruty.
My gut feeling in your situ is best to buy, as long as you got on property ladder more than 3 yrs ago, you won't truly end up out of pocket. And it sounds like you intend to stay in this new house for at least medium term of >= 8 yrs which also hedges against house price flux (plus it's a house you like so will make you happy, happiness cant be priced).

Do you have any mortgage or unemployment insurance, though?

Original poster

ruty · 06/07/2008 16:52

ooh er, not sure about 8 years. We were thinking of staying at least 4 years, wonder what house prices will be like then...
2 things are worrying me, we have to remortgage in december, and have no idea what rate we'll get then, and also if house prices go down dramatically by december will we get the full mortgage we need. We have abou 20% equity.
We'll kick ourselves if house prices really fall and we couldhave got something much cheaper, as we are getting an interest only mortgage and we are pushing ourselves..

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twinsetandpearls · 06/07/2008 16:54

We are in the process of moving, we can't sell ours and we can't reduce it any more so will take it off the market. If we had of sold we would have waited before buying again unless something really caught our eye.

I would be very nervous in the current climate about mortgaging up to the hilt or relying on remortgaging and unknown rates tbh. Particularly if you are only planning on staying for a few years,

Original poster

ruty · 06/07/2008 17:03

problem with renting is rentals go so fast in the school catchment area and are now available for septembr, we'll have nowhere to live for a month. Aaarg. Feel Screwed either way. have to move as now too small for us and not in school catchment, have to apply in September. Bugger. the schools thing is a bloody nightmare.

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twinsetandpearls · 06/07/2008 17:07

Rentals where we are moving to are doing the same thing and we have had the whole need an address to get a school place fiasco.

IN the end I agreed to let a house out over the phone without seeing more than an external photograph just so we could have an address. We have now seen internal photos and it looks lovely, we see it in the flesh so to speak next week. Madness!

peanutbutterkid · 06/07/2008 17:09

In a time of uncertainty, surely best thing to do is what feels like it will make you happiest over next 2 years?

That said, I would be very reluctant to buy if I could only afford an interest only mortgage, it's a risky strategy (IMHO) for the negative equity risk, as you are obviously aware.

twinsetandpearls · 06/07/2008 17:11

I agree peanubutterkid, one of the things that motivated out deicision was the huge stress of trying to sell in a non existant market in Lancashire and arrange a new school and new house to buy in Dorset. I feel like a huge weight has been lifted off my shoulders.

Original poster

ruty · 06/07/2008 17:18

yes it is a bit stupid really. It would work out as long as prices didn't fall too much round here but it is a risk, even though we are getting hte house for quite a good price at the moment. Things are still selling around here though for slightly less, i don't know if it will really crash round here or not. Rentals are so bloody expensive though and a bit 'money down the drain' thought in this market maybe that is not as true as it used to be..

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WideWebWitch · 06/07/2008 17:19

I think it's ok to move now IF:

you can afford the repayments on your mortgage

you will still be able to afford the repayments if interest rates go up a bit

you are not only affording it on interest only as the capital still has to be repaid at some point (unless you have a plan for doing this)

you can afford the repayments even if the value of your house goes down.

So for eg if your house is worth, say £550k atm, you have a mortgage of £500k and prices go down by 40% (my favourite figure to quote re prices going down!) that same house will be worth 40% (eg £220k) less so will now be worth £330k but with a mortgage on it of £500k. As the house is only now worth £330k, you wouldn't be able to realise your asset to repay the mortgage should you need to. That's the problem.

If it doesn't matter to you because you intend to staty in the house for years and years and you don't care what it's worth on paper because you love it long term then I'd say go ahead.

If I was in your position with a reasonable amount of equity in your house I'd sell and rent and wait for prices to drop. Because I reckon they will and by 30-40%.

Personally I think if you don't sell now you'll potentially 'lose' a lot more than £8k. That's assuming you can find anyone to buy your house, the market is incredibly stagnant atm.

Original poster

ruty · 06/07/2008 17:30

do you think they will drop everwhere by that amount WWW?

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WideWebWitch · 06/07/2008 17:33

I do. But I am no expert Ruty. However, the IMF are saying 30%

and here, not much moving in the market atm, everyone's jittery

WideWebWitch · 06/07/2008 17:35

And I don't know how old you are, are you old enough to remember the last recession? My mum lost money on a flat in Bath! Unthinkable during the last 10 years but I remember it happening. And I remember interst rates at 15% - not that I'm suggesting they'll go that high, just that no-one could cope, people were handing their keys back to the banks everywhere and STILL owed thousands.

Original poster

ruty · 06/07/2008 17:38

i was at university, it kind of passed me by. Do you really think a similar crash is on the cards?

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noddyholder · 06/07/2008 17:41

WWW is spot on.Unless you have big £ in this house and sure thing jobs and are planning to live in the house for at least 10 yrs then ok But prices will fall as the banks have stopped lending because they are no longer in a position to take risks and will only lend now to certain people with lower salary multiples.They will not lend again in a big way until prices reflect salaries.I would say 40% down by about 2011 and the IMF and the city are saying no recovery before 2017.

DaisySteiner · 06/07/2008 17:45

My worries would be a) whether you will be able to afford the new mortgage in December when your current deal ends as you will almost certainly have to pay more than you do now and
b) if prices drop between now and December will your loan to value ratio be low enough to get an affordable mortgage.

Personally I would at the very least get some professional advice on all of this. Do you have to move now, couldn't you wait until December when you've got a new mortgage arranged and see what deal you can actually get in practice.

Original poster

ruty · 06/07/2008 17:47

we have a buyer now. not sure we will have in dec. Andhave to get into bloody school catchment area. If you are right noddy, it would be stupid to buy wouldn't it, especially on an interest only mortgage. And have spent money on a survey. Oh fuckitty fuck.

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Original poster

ruty · 06/07/2008 17:48

professional advice meaning who DS? our ifa registered broker isn't advising u s either way, he doesn't think we'll get a crash but then it is in his interest to say so isn't it.

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noddyholder · 06/07/2008 17:48

It would be mad to stretch yourself interest only as that is just like renting.It is ok in a rising market but in a falling market is madness really.

WideWebWitch · 06/07/2008 17:50

If you have a buyer GRAB THEM and get the house sold. Then rent in catchment. That's what I'd do in your position.

noddyholder · 06/07/2008 17:52

Yes take the money and run as you will probably lose another 15% by December as winter is always slower

Original poster

ruty · 06/07/2008 18:16

if we stayed 10 years it would make it worthwhile? it is just to rent means we have to find somewhere to live over the summer, no rentals available until we exchange and then a month's notice, and renting is expensive too.

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Chocolateteapot · 06/07/2008 21:08

I would do what Noddy & WWW say. We have just received planning permission for an extension but are saving the money to make sure our salary multiples are OK for when we come to re-mortgage next year. Also, we have been paying interest only for much too long so are now going to start paying chunks off our mortgage. It was fine whilst in a rising market as we had the option to sell and buy something with a much smaller mortgage but that option has gone now.

We are in Dorset where prices are high compared to average salary, so I think things were always going to start going down pretty quickly here. A friend had one of the local estate agents round the other day. He is full of doom and gloom. According to him prices here are down 10% since last summer and he has never known it as bad as this in the 30 years he has been in the business, says wasn't even as bad last time in the 90s. A friend is in Somerset and an agent there told her neighbour that her house which was up last summer for £350 (she turned down £330) would now be going for something £280. Again, low salaries, high prices, so problems kick in quickly.

Do understand how difficult it is with the school catchments, we ended up buying before we sold to get DD into school down here when moving down, but now is really not the time to be stretching yourself.

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