Due to move this week, really worried about property crash and risk of negative equity. Sensible thoughts would be much appreciated.

[Entreprecurious]

I know people have much bigger concerns at the moment but could really do with some sane feedback.

Situation as follows:

• been planning this move for months and months, numerous set-backs
• sold our old home in Jan and moved out into rented accommodation
• exchanged a few weeks ago on new home
• have a great interest only mortgage set-up and a good ratio of deposit to loan etc, which leaves us with v low monthly mortgage outgoings

However, if house prices crash totally, we could end up in a really different position 2 years from now having lost all the equity on our home, with no access to an interest-only mortgage and paying much higher rates of interest. I have a start-up, which has been totally clobbered by the coronavirus so DH is the only one with a stable income. And we've no idea really whether he will still have that 2 years from now bearing in mind the widespread uncertainty.

It would be awful to pull out now, we would let down our sellers and their sellers so badly and I would hate to do that. But I'm genuinely concerned about the possibility of losing a huge sum (and all our security really) in equity.

Can anyone help me think this through? Thank you.

If you've already exchanged you'd lose your deposit if you pull out now no?

I think these are such unusual circumstances you have to do what’s best for you , if you really think this might now cost you too much now circumstances have changed. I think any seller would be tense at the moment as a lot has changed .

If you're stuck in rented, then you need to be careful that you don't get stuck out of the housing market. You won't be building up any equity while you're renting.

I think it's likely house prices will drop a bit, but when that happens people stop putting houses on the market, so this prevents them dropping too low as there is more demand than supply. Ultimately, there are too few houses for the population and any break in construction will mean fewer houses built this year.

It's such a personal decision depending on individual financial circumstances that nobody can really say for certain, but I'd probably still go ahead, but only with the intention of staying there for a good period of time.

Thanks for your responses. We'd lose our deposit so it would be a really big deal. And we'd only pull out if we thought we'd lose significantly more than that by going forward. @MaJoady - what you say about supply preventing prices dropping too much is encouraging.

Negative equity is only a “real” problem if you need to sell/remortgage. If you’re able to stay put indefinitely and don’t need to change your mortgage then it’s only an issue in paper and you can wait it out until property prices recover. As a PP said, if you’ve exchanged then you’re legally bound to the purchase so would lose money if you pulled out now. This is a definite cost whereas house prices dropping enough to put you into negative equity is only a possibility. You should consider all of these factors before deciding what to do. (Sorry that’s not more helpful!)

@entreprecurious As with everything to do with house prices, nothing is guaranteed, but it seems to be what happened during Brexit. The catastrophic house price crashes many were predicting haven't happened.

House prices crashes are no good for anyone and the market does it's best to mitigate. I'm still continuing with my purchase, as I believe it still puts me in a more secure position than renting.

We are due to move in about 10 days we are exchanging one day and moving the next as I felt it was too risky in the current climate to do anything else. We are going ahead with it and taking a long term view. Despite it being a very large investment our loan to value is fairly low and we intend to be there for at least the next 20 years!

@princessSarene makes a good point too about known costs and potential costs.

Just carry on - there is no point worrying about the housing market at this stage,

If you've bought a short term home you always have this risk and it's not really worth it, but a long term home will carry less risk and you'll be fine.

Thanks v much for the responses everyone.. It's definitely a long-term purchase and we want to live there until well after the kids have grown up and left but my concern is what will happen if there's been a big drop in value by the time we have to renew our mortgage in 24 months. Currently we have relatively low loan to value (but still a lot of money owed!) and a tracker mortgage (which is v low interest at the mo obvs) but if house prices were to drop by a really significant percentage and interest rates have gone up a lot by then (combined with the fact that we wouldn't then be able to get an interest-only if our LTV was much higher) our monthly outgoings in a couple of years time our monthly outgoings might go through the roof.

I am taking on board what the majority of you have said though, and I think in all likelihood we will just go ahead. But I feel v anxious about it, it has just become a very different proposition.

We were in the process of buying our current home when prices crashed, I think it was 2007/8. We went ahead and the value of the property initially dipped by about £30k for about two years but 10 years after we bought it we had it valued at £100k more than we paid for it. So all good in the long run and we’ve loved bringing up our kids in this house. I think house prices will always go up over time as there is so much demand for housing in this country. You just have to be careful if you are buying a property you only plan to live in for a small number of years.

We're moving on Monday. Exchanged a while ago. We would have pulled out if we knew then what we know now, but here we are.

Currently predicting a 20% correction, prices have been kept in a bubble over the years due to low interest rates, government prop up schemes And Bank of mum and dad ploughing money in

www.thisismoney.co.uk/money/mortgageshome/article-8138747/House-prices-collapse-20-amid-coronavirus-crisis.html

As long as you aren't stretching yourselves to the limit I'd go for it.

I've no idea where you're buying but for e.g. let's say you're buying a house for £150k, you lose a 15k deposit and end up renting for 5 years at £600pcm . At the end of 5 years you've spent £51k, so if house prices drop by a third you aren't any worse off.

Try it with your own figures and see how it looks to you. The other thing I'd think about is trying to over pay/save as much as you can to give yourselves a buffer just in case.

I’m a bit worried about the interest only element of this. We’re in totally uncharted waters at the moment and whilst not a problem if you are staying longterm , how are you planning to pay the mortgage off if you don’t mind me asking ?

Can you afford to extend the length of the initial period before remortgage?

To be honest your biggest worry is the interest only mortgage as that will always leave you vulnerable to house price fluctuations. Is there any chance that you could move onto a repayment mortgage so that you are less exposed?

I was reading it and thinking the interest only is the problem,

I think we will have a bad recession after this is over. House prices will probably dip but the reality is there is still more demand than supply, the extent of demand will just reduce

So as a previous poster said, you may experience a dip but they will recover and what's more, this is a long term buy so go ahead rather than loose your deposit

I dont think they will crash personally. I expect they'll dip and the market will slow down utterly but they will bounce back.

Thanks so much for taking the time to think about this and answer - it really means a lot.

@postnotinhaste and others who've posted re interest only mortgage - it is one that gives us the option to pay down in lump sums, and we'd factored in a monthly saving plan in order to pay down a further significant portion in the next 2 years. And my usual instinct is to use any savings to pay down mortgage as fast as possible.

But we're now wondering if we should keep aside those savings as a buffer in case DH loses his job. It's not inconceivable that his firm could go bust as part of all this in which case we'd need that money to live on. Unlikely but we've seen all sorts of very unlikely things happen in the past few weeks.

@marieG10 and @houseelfy - that's encouraging. We're in London and some of the stuff I'm reading seems to suggest that the housing market here is more resilient but meh, I don't know. It just feels as if everything is totally volatile at the moment and it seems a terrible time to take a risk like this.

Saying that, I do want to get into a permanent home and be able to enjoy it with the kids. If we were to leave it another 2 years DC would be 14 and 12 by that time.

In the current circumstances that does make sense as gives you flexibility. If you were looking for a short term place I would say no but as long term then good idea,

Can’t see that we aren’t going to hit a deep recession now and personally know so many people who have lost their jobs and possibly businesses this week. I’d be amazed if there isn’t a big drop in prices now.

If you stay in rental your landlord may be effected depending on their position so doing what you plan will give some security.

The housing market will crash, there will be fewer homes for sale until banks start repossessing, people hand the keys back to the bank because they have no jobs, no prospect of getting one and just give up.

It's happened that way in recessions since the 1930's and this is going to be the biggest recession the world has ever seen. We are only a few weeks into this, it's going to go on for a long long time sadly.

We are moving on Friday having exchanged last week. We need to be in the new location for school and have no plans to move again anytime soon so we aren’t overly concerned about any drop in prices in the short term.

My only worry is if everything gets locked down and whether we could still physically do the move!