Worried about interest rates

[Babaandbana]

We are first time buyers. We are buying under the 95% deposit scheme. Our mortgage will be £750 a month fixed for 5 years (which is the same as our rent). But I’m really worried in that time interest rates will rise and rise, and house prices might fall. Is now a good time to buy?

The mortgage illustration says that our mortgage could rise to £1,300 if after the fixed period the SVR is 9%. But we couldn’t afford to pay that. And if we end up in negative equity we couldn’t afford to sell.

So is buying just a bad idea?

I would go for it. You don't have to overpay each month but if at any point you have some surplus then you could use it on the mortgage - mine gave me the option to overpay monthly or one-off. I did it monthly because I could afford it but anything helps. As someone said upthread, a ten-year fix would give you even more peace of mind but it's likely to be more expensive.

We looked into a 10 year fixed and can't really afford the repayments. I already work fulltime but my job has lots of scope for career progression so in theory I should be making more money in 5 years (say a jump from 30K per year to 40K).

Our children are 10 and 8 so thankfully the years of needing fulltime childcare are over.

I'm in the same position. Finally have enough for a 10% deposit plus stamp duty etc (I'm in SE for stupid money is needed). I also have 2 DC's. I've just started the process to buy a small 3 bed mid terrace. My take on it is that we can live in this house forever if needs be so subject to employment we can wade out negative equity. We're at the end of high nursery fees and I'm PT so will eventually return to FT work so we should be better off financially in the future. We can afford to overpay a bit.

We're taking a 5 year fix as we plan to stay here for at least that long. If there was a property crash in the near future we just won't have paid enough off the balance if we did a 2 year fix so 5 years seems safer to us.

Our rent is actually £200 cheaper than what our mortgage will be but that is because our landlord hasn't increased our rent in 5 years. There's very little to rent in my area, begging messages on the local Facebook group seeking rentals are becoming more common. If I had to find a new rental I'd have to move into a smaller property because the rent for a 3 bed on a run down council estate will be circa £300 a month more than we currently pay.

Generic good advice is to buy now, fix for 5 years, with the benefit of fixed costs try to get some savings/investments behind you & a few pay rises, stress test future payments for 6% rates or so (most people can probably cover this with minor sacrifice).

Following as I am also interested

In the event that you didn't buy and interest rates rose to 9%, could you afford your rent?

Ah, the mumsnet "yes, buy a house, nothing can go wrong" routine. I wouldn't rush into anything right now. House prices are batshit - an absolute bubble.

If you can’t afford interest fluctuations yet, you shouldn’t buy. It is very simple.

No point worrying about something you can control.

If it happens worry about it then. In the interim save some extra money if you can and then forget it.

@Wilfulchaos

Ah, the mumsnet "yes, buy a house, nothing can go wrong" routine. I wouldn't rush into anything right now. House prices are batshit - an absolute bubble.

The internet was full of people saying house prices were crazy and it was a bubble and there was going to be a crash etc etc back when I bought in 2015. I made nearly £100k profit on that place when I sold it!