talk me through the house price crash please

[ruty]

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..

Just had another thought - that will only work if you're married. I can't see if you have a DH or DP. Married couples can move money between them freely, so putting all of it in your name for savings, and then in both of your names again to buy a house wouldn't be an issue.

Heated I would go for the 5 year fixed rate as in the next 5 years interest rates are likely to go up and not come down lower than they are currently. And you will know how much you have to pay for those 5 years and be able to buget around it. In 3 years interest rates will probably go up quite abit and everytime you will be paying more.

yes have a dh - very useful tips MrsT.

Why do you say that fiodyl? Everything I've read suggests that although interest rates may go up a bit this year they will probably come down again next year.

See here for example

The IMF and bank of england have predicted rises in interest over the next few years This country is 7 weeks from serious recession according to todays figures and apparently house prices are to revert to sept 2003 prices with no return to 2007 peak levels before 2015-17.

I would only consider it if it is the house that you are planning on staying in for ever.

Our neighbour put their house on the market in January for £475,000 and had a buyer for just under the asking price who ended up pulling out. They have now had to reduce the asking price to £290,000 and still are not having viewings.

The reason I say it Heated is that in a time ofncertaintity if you get a fixed rate deal at an amount you can aford then you know you will always be able to afford it regardless of what interest rates do.
If you go for the tracker then there is an element of risk that you may not be able to meet your mortgage payments if rates increase alot. I would only go for it if I was sure I could still afford it if(not saying they wil)interest rates went up to 8% or more.

Personally I wouldnt go for either of them if there was a choice Id get a fixed rate for 2-3 years or if I went for a tracker Id get a lifetime tracker so that I could get out if rates increased too much.

2 year fixes are not a good buy atm though as they have higher rates bigger deposit required and when you work out the arrangement costs over the 2 yrs you are rarely saving anything.

Thanks for the input. We have gone for the 5yr fixed as there's no reservation fee and we know we can afford it.

Nobody has mentioned yet the fact that when you sell your house that you will have equity and with this you should invest the money and its interest can pay towards the rent. There are bank accounts out there paying 7% interest if you tie your money up for one year. So say you had 200k equity from selling your property you would earn £14k in that year from interest only. This would be a good contribution to the rental and would still mean that 200k is intact. If depreciation of 40% on properties as forecast happens then that same £200k ploughed back into a property would only be worth £120k by 2011. I'm sorry to get so mathsey but if ever before this is now the time to do the maths!!. I strongly advise you to sell now and rent- be warned!!.

Apologies for suggesting nobody had mentioned the equity thing in bank before as only read 1st page and didn't realise there were 3 more pages!!. You are very wise to rent and all the best with your decision. We're renting and are glad to be with the current climate.