Is it madness to buy now?

[PopsicleBopsicle]

We are in the conveyancying for what we hope will be our forever house, however I'm starting to have jitters about buying at the peak of a declining market.

It's outer London, E4 postcode with good schools nearby and ok transport links and a much larger than usual house.
The house is at the top of our budget and 50-70k more than anything else on the road, however it has a naturally larger square footage and has been extended to the rear and loft which would have cost us 100k to do anyway.

Basically, I've g

If you love the house and the location, go for it. Who cares on paper what the value is? As long as you can serve the mortgage the 'value' doesn't actually matter.

This kind of advice gets thrown around a lot on here but I think it is a bit careless, especially in the current climate.

Have you ever lived through negative equity, Hipster? Have you thought about what might happen if the OP or their OH loses their job/earns less etc and can't serve the mortgage anymore?

Why the rush? It's highly likely that the London market is heading down... I don't actually believe that any house can be that unique to risk exposing themselves to a massive mortgage, and overpaying on the sale price, in these times? And regarding the 15k reduction...surely the seller will be glad to have the property off their hands?

ImAFurchester I hope it all goes well for you, let's hope the predictions are totally wrong...we're in the same boat...bought in 2014...

I'm afraid I think it would be, yes.

my sister is so desperate to move from her rough area she's looking at a bridging loan for an over priced new build and then saying she will get the current place sold after. She's lived in the current place more than 20 years so I appreciate that any money is profit when you bought for the amount she did (she bought 10 years before I did).

but, I think she will have massively overpaid for a new build box and live to regret that. I suppose if you are okay with it going down in price, it's different. she is saying that she is so desperate to move, she will take that risk, but in reality she thinks London prices will get higher, whereas I think they must be at tipping point.

the other factor is how you feel about work? I think this is key - hate working, she loves it. So if I overpaid for a home I wouldn't think "ah well, such is life" - I would be aware of every minute I'd wished myself out of the office while paying that extra.

Unless you are in a really tough spot, I don't think I'd move. Also, is there a name for this - what's the percentage potential for you if you are moving somewhere bigger? For the sake of easy maths, if I tried to move to a large 2 bed with a separate kitchen, that extra space (which probably doesn't amount to much in sq feet) would honestly cost me about £80k.

If prices drop, yes, I will sell my place for less, but then if the extra space i want costs me £20k, it will still work out better than if I moved now.

It may be that you don't resent the extra money at all in which case....I've waffled on for no reason, sorry!! lol.

We've just exchanged, going from renting to buying, but we've been in a similar situation before - confidence and prices go down, but all the 95% mortgages disappear too for a few years and it's then impossible to buy anything unless you have a large deposit (and we've been saving for years to get the money for our 5% deposit as it is!).

Also, negative equity doesn't last forever - prices took about 4/5 years maximum to get back up in the worst crash in the 90s after we left the ERM, and only a couple of years in the 2008 crash. In the meantime, we'll have built up a bit of equity (having paid off some of the loan) and be ready for the next move.

We're close to completion. When we bought this property it was 2008 and the market was at its peak and lots of talk of it crashing. We looked at mortgages, worked out what we could afford and went for it regardless as we needed to move. For 5 years we were probably in negative equity (didn't get it valued but assumed) now we've made a good amount, sold in 3 days and the house we're buying is considerably more but we've decided not to overstretch ourselves. We've fixed the mortgage at a very low rate for 5 years so after that we know we should have received rises at work and if rates were sky high we could stretch our mortgage over a longer period so we have a contingency as much as we can. No one knows what's round the corner and if you waited for a stable economy you'd never do anything. It can always be seen as a risk but no one has a crystal ball. You just keep living and hope for the best.

That said, I wouldn't choose now to make an investment in property unless it was a seriously long term plan.

If it is your "forever home" what difference does it make if the market crashes. Even if you find that you £2m house is only worth £75 , if you're not planning to move it really is only paper.
Move to your big home and be happy, don't worry about how much your home is worth, as it will be your family home and as such, priceless to you.

Prices in Chingford have risen by about 3% over the last year- not all of London follows the same trend at the same time. The average rise across London over the same timeframe was 1.2%; some boroughs have seen prices fall.

Have you ever lived through negative equity, Hipster

I have actually - made the 'mistake ' of buying in the north at the last peak and over paid on the house anyway. However it was a lovely house and I was very happy there. It gave me stability, happy memories and I wasn't at risk of not being able to pay the mortgage.

After 10 years of mortgage payments I sold for less than I paid, but I still walked away with more cash out since I'd been working hard at the mortgage.

I would caution people to fix for as long as economically possible at the moment, and protect themselves with income protection in the early stage of the mortgage.

Bargain hard and bring the price down. This is the best market for that.

We bought both our houses when the market was heading down (after 9/11 and in 2012 when the market was soft). We were hardnosed in the negotiations and got a good discount. IN each case, the market recovered quickly and then climbed and climbed.

I don't think you can go that far wrong in London. But get a good price for it under current conditions.

Chingford is one of the undiscovered corners of London. A lovely place to live and still - by London standards - cheap. Good schools, good sense of community. Get it while you still can - prices will rise in the longer term.

Sounds like a reasonable move...you don't want to stay where you are, new house has long term potential and you can get stability of a long term fixed rate to pay down your debt. I moved to the same postcode a year ago with similar plans btw.

You all make it sound so easy I admire that!

So you're saying save up the 25k to get your 500k house on the 95% mortgage... I guess I'm more of a penny pincher but wouldn't it take you decades to pay that off? Genuinely curious...

and aren't you worried about things going wrong down the line? I guess not everyone is concerned about job losses for example...I'd also not have the guts to factor in a future pay rise into the mortgage calculation...

Also what happens if the value of said 500k forever home drops to £75 like someone suggested, at a time when you can't service the mortgage? But maybe your jobs are all really safe so you don't have to worry?

I don't agree with the happy memories idea as we've had as happy memories in rented as much as in our own property. And I totally agree that the London prices are only collapsing in central London, and in a lot of zone 2...

So OP I'd be curious what you've decided and maybe buying further out from the centre could be ok? I'd still bargain or the 15k off though

I don't agree with the happy memories idea as we've had as happy memories in rented as much as in our own propert

I didn't mean to imply you can't have happy memories in rented! I was just trying to say that at the time, he house being in negative equity wasn't something that worried me and I don't look back and feel 'trapped' or anything.

You know, if the worst comes to the worst people try very very very hard to keep servicing their mortgage. They take in lodgers, they take on additional work, they cut their lifestyle back to the bare bones.

Home owners should also have several (at least 6) months mortgage payments in savings just in case. If you can't save a bit of cash each month and service mortgage and bills you probably can't afford the house.

I don't have any dependants which makes things easier.

Although there is no suggestion the Op would be anywhere near negative equity! Since she is moving from one London property to another once can assume she has built up a significant equit cushion and isn't on a shaky 95% mortgage.

Beware.... the nasty little ghouls on housepricecrash.co.uk have flagged up this thread:
www.housepricecrash.co.uk/forum/index.php?/topic/230563-is-it-madness-to-buy-now/#comment-1103259126

Who are those people?!

We bought in 2007 at the height of the market and then spent the next 8 years in negative equity. Did we regret buying it, yes at times when we saw houses we would have loved to buy but couldn't and when I had to apply to local primary school rather than the one I wanted ds to go to as we hadn't moved areas.

But we worked round it, I moved ds to the school I wanted at the end of reception as they had a place for him. We also worked out that if we hadn't bought when we did we would have ended up in rented and spent an extra 20 k in rent over the last 8 years. We are now moving to a lovely house in our ideal location and even if house prices crash we know we will be happy there and it's affordable .

I'm with Isobel in the whole thing about not taking on the max mortgage in case of illness, job loss etc.

Also, the "it's only paper" argument baffles me but again that's because if the price could have been lower later, I'd be resentful of all the hours taken to pay the higher price.