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Original poster

FTB in London, if you were in my shoes would you go ahead with purchasing or wait till next year?

114 replies

Schg1911 · 01/10/2022 22:24

I'm absolutely crapping myself with the news that there will be a housing crash next year. I've been looking for over year and just last week found a place that I really like. My offer was accepted and now I am wondering if it will be better to drop out and wait to see how interest rates affect the housing market.

I'm not desperate to buy right now as I have a comfortable long term renting situation. However, my offer was accepted on a 2 bed 2 bath flat in Bow, London right next to Bromley-by-Bow tube station for 425k (it is not a new build). I would be fixing my mortgage rate for 5 years and I have applied for a mortgage with a 3.9% interest rate. It seems crazy that this flat could potentially drop 10% -40% next year that is a lot of money!! But the flat is so nice I would be upset if next year predictions fail to come to fruition and I am unable to buy a flat of the same quality for a lower or the same price. But at the same time I'm terrified of going through with this purchase and being in negative equity.

To give you some background to my finances:

  • My job is pretty secure as I work in the Cyber Security industry.
  • I am currently aged 29 and would like to keep a hold of the property I buy for at least 10 years.
  • I currently take home £3900 after tax and pension deductions etc. (With an annual bonus after tax of around £5k which I haven't included in the above figure).
  • If I get offered the mortgage with a 3.9% interest rate my mortgage payments will be £1800.
  • After mortgage payments and all bills such as council tax/service charge/gas/leccy etc. are accounted for I will be left with £1500.

Taking into account the above it seems affordable to me. But I am terrified, could I be buying in the worst time ever?! If this flat was to drop in value next year to say £375k I would be screwed.

If you were in my situation would you wait to see what happens next year or just steam ahead with the purchase?

OP posts:
AuntSalli · 02/10/2022 10:43

The problem is read any section of Mumsnet most days and people are whingeing about the public services, the NHS is on its knees and the mainstream media will convince people that the way to fix that is to privatise it that’s the second wave that they are planning after they win the next election which sadly I think they will.

pattihews · 02/10/2022 10:48

AuntSalli · 02/10/2022 10:26

In the event of this imaginary recession that we’re going to have where house prices are plummeting and people are struggling to pay their mortgage is are we envisaging that in this fantasy people will still require an Airbnb in central London ? I would thought that would have been the first cut back.

People will always need to come to London to do, say, a short course, visit family in hospital, have treatment, attend interviews, view properties. And of course, there are millions of tourists from countries that haven't fucked themselves over with Brexit and disastrous mini-budgets who'll flock here while the pound is low.

cloutneerbeout · 02/10/2022 10:49

AuntSalli · 02/10/2022 10:26

In the event of this imaginary recession that we’re going to have where house prices are plummeting and people are struggling to pay their mortgage is are we envisaging that in this fantasy people will still require an Airbnb in central London ? I would thought that would have been the first cut back.

It's not imaginary that people are going to struggle to repay their mortgages.

A recession is also not imaginary, plenty of learned economists have predicted one.

AuntSalli · 02/10/2022 10:51

cloutneerbeout · 02/10/2022 10:49

It's not imaginary that people are going to struggle to repay their mortgages.

A recession is also not imaginary, plenty of learned economists have predicted one.

Show quote history

They predicted a meltdown in March 2020 too.
I guess even a broken clock is broken twice a day.

floorida · 02/10/2022 10:57

Well the economic impact from Covid was bigger than realised & we haven't got the economy back to pre pandemic levels. Don't forgot the BOE cut rates & then there was the stamp duty changes which stopped prices from falling. Plenty of flats did sell for the same or less near me though.

Lozzybear · 02/10/2022 11:05

If I were you I would buy it, get a lodger straight away and use any money you receive from the lodger to make additional payments against the mortgage. This will start to improve your LTV straight away or, worse case scenario, in a falling market help to keep it at 90%.

AuntSalli · 02/10/2022 11:06

There are Economist out there that think it could work I’m not planning my life around that success but people keep accusing Liz Truss being utterly ridiculously stupid like comically so and I don’t think that’s true. We all thought Boris was a bumbling clown but I suspect he’ll end up having the last laugh financially.

floorida · 02/10/2022 11:12

well the fact the BOE had to step in to protect pensions is not a good start imo.

Rafferty10 · 02/10/2022 11:13

Do not wait, you are missing the most important thing...interest rates will almost certainly be MUCH higher next year...This may stop you even getting a mortgage offer.

Over 10 years you are pretty secure, historically any falls are usually modest and eventually bounce back.

floorida · 02/10/2022 11:14

& im not convinced the 45% tax cut will happen, bad optics.

SherwoodForest · 02/10/2022 11:24

London house prices always go up in the long term so, if you like the flat, have a good mortgage deal and plan to stay long term, I would definitely go ahead.
At the start of lockdown, I advised a friend that house prices would probably drop (as they had when I was selling after the Brexit vote), but I was wrong, prices went up a lot and she is now priced out.
In London, I think you should buy when you can.

Calmdown14 · 02/10/2022 11:35

I am as cautious as they come but in your situation I would go for it.

Even if it drops by a significant amount, you will have paid a fair chunk off in that time.

It's two bed so you could start a family there. I'd be wary of a one bed as there's a bigger push to move but this sounds like a place you could adapt to lots of stages of life, even if it's not exactly what you'd want.

I'd take a decent period of fix though to lower the chances you will need to remortgage in negative equity or with a very low LTV.

If you can overpay your mortgage a bit once your student loans are up or if you get a lodger you can also get ahead in terms of equity

IDidntKnowItWasAParty · 02/10/2022 11:49

I would do it OP. Given the details youve provided above. 5-yr fixed mortgage etc. (I would overpay on the mortgage to put yourself in a better position when the 5 yrs is up.)
But only you can decide what you're comfortable with.

YankeeDad · 02/10/2022 12:17

Everything you say argues for buying it ... except for the most important thing, which is your low deposit. If flat prices drop 10% or more then you will be in negative equity, unable to sell the property if you need to unless you can stump up another wad of cash from somewhere else.

If it were me, then I would not want to take the risk of being trapped in a negative equity property, even if I liked it.

rainingsnoring · 02/10/2022 12:49

AuntSalli · 02/10/2022 10:26

In the event of this imaginary recession that we’re going to have where house prices are plummeting and people are struggling to pay their mortgage is are we envisaging that in this fantasy people will still require an Airbnb in central London ? I would thought that would have been the first cut back.

Imaginary recession. Oh dear!

rainingsnoring · 02/10/2022 13:04

AuntSalli · 02/10/2022 10:51

They predicted a meltdown in March 2020 too.
I guess even a broken clock is broken twice a day.

Show quote history

There was a meltdown in March 2020.
Then the BOE stepped in and lowered interest rates to zero and started a multi billion £ QE program, the government shut down the economy (big mistake) and introduced furlough and other schemes.
Did you miss all that?

TraceyGerbil · 02/10/2022 13:10

Buy it. Look at it as a long term investment. And you can always rent out the spare room if things get tight.

Digimoor · 02/10/2022 19:31

How confident are you that your rent won't increase?
How will you protect your deposit against inflation?

cloutneerbeout · 02/10/2022 20:04

Digimoor · 02/10/2022 19:31

How confident are you that your rent won't increase?
How will you protect your deposit against inflation?

Op's rent isn't going to increase from 500pm to £1800 pm, is it.

pattihews · 03/10/2022 12:17

No, OP's rent isn't going through the roof. If OP stays where they are and saves £1200 a month, in a year or two's time when the property market bottoms out she could be in a good position to pick up a better flat and she could use her saved £10-20k to help pay the higher mortgage rate or to put down a bigger deposit.

I would fear moving into the dream flat now, discovering it's not as amazing as it seemed on viewing (which is quite a common experience) and then being trapped in negative equity and unable to move. That's what happened to me and I wouldn't want to go through it again.

Bunda · 03/10/2022 13:03

I would go for it. If property prices drop people will be less likely to want to sell unless they have to, which means there will be fewer choices available for you. If you are staying put for 10 years it could be ok! Fingers crossed for you and well done for choosing such a lucrative career. You will be earning more in the next 5-10 years anyway!

FrownedUpon · 03/10/2022 13:10

Go for it. There’s always a reason to stall and wait, but buying is the best option. You’ll be wasting so much money on rent otherwise.

Adj · 08/10/2022 15:17

I would 100% go ahead!

xxyzz · 08/10/2022 20:57

Would not go for it. I'm in a similar situation and we're holding off - why would I throw away my deposit and risk negative equity when I can just wait a few months? - prices round me are already coming down so happy to wait for more falls, as I'm in no particular hurry to move.

Given that a) your deposit is very low b) your mortgage is nearly 50% of your earnings, and you haven't mentioned if there's a service charge, with it being a flat as well, and c) you're at exactly the age where you might well want/need to move in the next decade, if you might someone and/or have kids, I don't think the flat sounds very ideal at all.

Better to buy after the falls, get a better place for the money or buy at a cheaper price, and avoid negative equity.

rainingsnoring · 08/10/2022 22:18

xxyzz · 08/10/2022 20:57

Would not go for it. I'm in a similar situation and we're holding off - why would I throw away my deposit and risk negative equity when I can just wait a few months? - prices round me are already coming down so happy to wait for more falls, as I'm in no particular hurry to move.

Given that a) your deposit is very low b) your mortgage is nearly 50% of your earnings, and you haven't mentioned if there's a service charge, with it being a flat as well, and c) you're at exactly the age where you might well want/need to move in the next decade, if you might someone and/or have kids, I don't think the flat sounds very ideal at all.

Better to buy after the falls, get a better place for the money or buy at a cheaper price, and avoid negative equity.

Exactly this.
You also are paying very little rent and say you are not desperate to move.
Why would you at present?

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