Anyone have experience buying property 07/08? Throwing a wobbly!

[jellywobble22]

Hi all

Made an offer on a property back in July, won against 3 other really strong offers so was estatic when I found out, property ticks a lot of boxes, and must have viewed over a dozen before finding 'the one', could see myself living there happily for 5+ years.

Process is still ongoing thanks to the lawyers being slower than athsmatic ants... as time goes on it seems the news each day gets worse and worse and I am having a few sleepless nights about buying at the peak and being in negative equity for 12+ months from completion :( .. not to mention that the mortage offer was agreed on the basis of 30% LTV so I'd be seeing best part of £150k life savings go is frankly frightening.

Has anyone had experiences buying in a downturn? Just wondering what to do - am I better staying put (my first home bought 6 years ago with negligble debt remaining thanks to overpaying) and waiting for a better priced house next year (admittedly not at the 3.4% interest I have agreed in the mortgage offer) or biting the bullet and moving....

@jellywobble22 I don't think other people's past experience is representative of what is happening now. Just because things have happened in the past, it doesn't follow that this time is the same.
The BOE pumped house prices with ongoing QE and ZIRP for years after the financial crisis. Recently, we have had massive QE yet again plus stamp duty and then people panicking and trying to grab a mortgage at low rates so that has caused a bit asset price increase.
The situation is different now so I very much doubt we are going to see a bounce back. Therefore, if your property loses significant value (as most areas did in 2008 and also 1990 before that), it is very likely that you would sell at a loss in 5 years time. I can't see any massive real growth in the housing market going forwards.
I think you have to think really carefully about pros and cons.

@rainingsnoring oh let me guess, is it different to this time ? HPC have also been saying that for 22 years.

I bought in a flat in the 2014 peak. We're selling it now for £65k less than we paid. The pandemic ruined the market for flats without outside space.

We'll see what happens @nothappyatwork
I've given my opinion but obviously I could be wrong as could you.

You didn't lose it really, the money you spent on it held the house's value when other houses that were not improved lost theirs. The next one you bought would have lost value over the same time, so you'd have bought it cheaper than if prices had gone up. If you're trading up, you gain by prices being lower, even if you get less for yours, you pay 'more less' for the more expensive one....

To be fair even to the doomsters, I think most people have been expecting a slowdown or fall in prices for some time. If interest rates had not been abnormally low for a long time, and kept low by government policy, I suspect prices would have climbed a lot slower than they have, they may even have fallen before now.
If we were looking at sustainable pricing, prices would have fallen. House prices have gone up a great deal faster than incomes- that's generally not thought to be sustainable. It's just the low interest rates, and to some extent covid disruptions in some areas of the market, that have allowed it to continue.

I am in a similar position OP.
we offered on a house 4weeks ago
The offer was declined and then two weeks ago they came back through the EA saying that they would like to go ahead. The issue for me is the huge jump in mortgage rates. The repayments have double since we started looking last year. I am about to start a new job. I am undecided.
However we have been in rented since 2009 and have paid over £350k in rent and moving costs. Our area is less than 1 hour from London with 72% of all sales going to London families. Hindsight is a wonderful thing. We couldn’t get a new mortgage in 2009 due to me being self employed. We sold at a loss of £40k on a 2006 purchase. Our EA told us house prices would fall, we’d pick something up. They didn’t. Nothing came to the market until 2012 and people sat on their hands. We fought for every large rental (3 generation household at the time). If you have a fixed rate offer and 30% deposit you will probably be OK.

No advice, but as someone who is currently moving your description of solicitors made me chuckle!

Well maybe I do have advice, which echos what most people have said above.
I bought my first house in 2009 for £125k. The previous owners bought it in 2007 for £135k so obviously they lost money.
I still own the house & rent it out now. Had the estate agent value it when they valued current house, he came back at £225k which is close to Zoopla valuation.

They lost money because they moved quickly, if they had stayed a few more years it would have been fine.

I agree and would be really happy to see prices return to 2020 levels around here that would be a 25% crash.

where I think it’s incredibly unrealistic is to be quoting 2013 and even 2008 prices I mean yes brilliant, I for one would snap at least 2 up at that price but don’t think really that’s what the house price crashers have got in mind.

Well not everywhere has gone up 25% in 2 years so I guess it depends on area.

I for one would snap at least 2 up at that price but don’t think really that’s what the house price crashers have got in mind.

Isn't the whole point that it's harder & more expensive to borrow & some people lose jobs because of the knock on impact?
I was planning an extension next yr but am holding off as I don't want to deplete my savings & Im already cutting back. The higher rates are also encouraging me to move money out of ISAs & into savings accounts.

I'm also going to massively overpay my mortgage, that's all money that could have been spent in the wider economy. If everyone does that it has an impact.

I wont lose my job and I wouldn’t find it hard to borrow the LTV i would need on the reduced capital. Overall I see in a far better position to purchase than any first time buyer.

But I was talking generally not about individuals.

I guess it depends on the FTBs, when we were in that situation we needed a 6 fig deposit which we had through saving & family. Same as everyone we knew.

With respect you weren’t you were talking about particular set of circumstances that you find yourself in with the extension and overpaying for example. There’s such variance in circumstances that I wouldn’t claim mine were typical but wouldn’t claim yours were either.

Isn't the whole point that it's harder & more expensive to borrow & some people lose jobs because of the knock on impact?

With respect I wrote the above as a general point as to what happens in a housing market downturn. Are you saying it doesn't happen even if not to you individually?

There’s such variance in circumstances that I wouldn’t claim mine were typical but wouldn’t claim yours were either.

I don't think i'm unusual to want to overpay whilst on a fix, plenty do that anyway. Lots of advice out there encouraging people to do just that.

it's only if you have to sell up when you’re in negative equity then it can become a problem

Isn’t it also a problem at mortgage renewal time though? If you bought with a 10% deposit but a few years later you don’t have any equity in the property because its value has fallen then what happens at remortgage time??

We bought in 2005 so had the fall just after. In reality it doesn't matter if your planning to stay a while. The house next to us sold for 115 in 2007/08 and we bought for 145 in 2005. So we saw an big percentage drop in our house value. Then a few years later next door s22old again for 180k. However neither effected us as we was not selling. We did remortgage and in 2012 our valuation was still 145 for the remortgage. However now it's 22 and the same house is 300k. Because of rent cap in London our SE house has exploded in value with the mass exodus from London. My overwhelming feeling is that I could never buy that house now. Its got to tank by over 50% before we go into negative equity and over time prices tend to rise. But it's true I had no idea prices would drop, but they the time they upticked it was unexpected and at a alarming rate

Surely negative equity also matters when renewing mortgages, as the ltv will change...

LTV hasn't ever come up in remortgaging for me as the real value never seems to be known. It was only a issue when assessed in person by the bank for valuation for equity release

I thought that by paying down the mortgage the idea is (usually) that when the time comes to remortgage, if your LTV is better than you get offered a better interest rate?

within reason if you drop from 95 to 90 great, 90 to 85 is significantly valuable. 75% would make a difference

Yes so if house prices do fall, then the old adage of ‘it doesn’t affect you unless you want to sell’ isn’t really true? Because at remortgage if you were banking on going from 90 to 85, you might actually end up at 95!

The picture will be alot clearer in 12 months time but if we are going back to personal circumstances at 6% my mortgage increases by £100 a month and my £6000 payrise will more than cover it. People need to chase the money.

Surely negative equity also matters when renewing mortgages, as the ltv will change...

Yes a better LTV can mean better rates.

We got a good fix this summer because our LTV was good.