Is it a terrible time to buy your first home?

[llamazoo2]

After a quick calculation we’d be paying almost 500£ more on the very same house we are renting right now, if we had a mortgage on it. Our rent is fixed and tenancy secure for at least three years from April

Have an AIP and a 5% deposit ready but reluctant to act due to the forecasted repayments which seem eye watering. A house valued at 200k repayments are 1100 a month and that’s on a 30 year term. 35 years only comes down by about 50£.
Would be about 28% of our net income which seems worryingly high to both of us. Prices remain high around us and houses don’t seem to be selling as fast as they were

Should we wait or will it only get worse?

I'd hang fire if I was in your position, I can't see house prices rising in the next couple of years so maybe keep saving that extra £500 a month towards extra deposit? (Having said that I thought both Brexit and Covid would crash the housing market and I was wrong so who knows)

When I bought my first house I was paying £650 rent and mortgage repayments were about £850 (on a slightly nicer house) however the interest part of the repayment (on a 25 year mortgage) was less than my rent so I justified it that way. Also I was lucky to buy just before houses started to increase in value so the same house would have been valued 10% more the next year so was motivated to buy to not be priced out.

Do you like where you live at the moment? :)

We are going to buy now. We have saved a small deposit but enough, and we don't have any security renting. We are happy to pay high payments for 2/3 years as no children and then hopefully things will calm down a bit and they will decrease. If they go up we are fortunate we can afford an increase too.
We are fed up of bad landlords not fixing issues in properties and the threat of non renewal each year. We figure it's better to be paying a mortgage where we probably get something back, than rent which is just a sinkhole for money for us. We are finding somewhere we think we could happily stay for at least 10 years if the worst happens and the market plummets, to give it time to bounce back. We always have the attitude why pay someone else's mortgage when we can pay ours instead - but that's just us!

Don’t forget to add the cost of two years’ rent onto your calculations.

In your position with a secure tenancy, cheap rent which won't be increased, I would continue to rent for now and reassess at the end of the year. Save up the £500/month to increase your deposit and hopefully put you in a better position. Prices have been going down in most areas for some months and this is likely to continue this year.

Op, look at your area and whether prices are decreasing or not. In my local area, prices started to increase much later than elsewhere and are continuing to increase (and have increased in the last month at a much faster rate than they over the last year)

@Treeeeeeee where abouts are you?

North east

Thank you! I'm in north west London (zone 6!) and am finding the same.

Personally, I would buy when you find the right place, can afford to and feel ready to. The markets will always go up and down and if you want to live somewhere longer-term you can ride out anything.

we’ve finally bought in 2018, had looked for a while and were close but then my job became insecure so we waited a bit.
A lot of people said not to back then because of Brexit. Well, as we know now it didn’t crash the market and, had we waited, I would have changed jobs in 2019, was in the travel industry and on furlough during Covid, prices shot up.., we probably still wouldn’t have bought now. Hubby is 13 years older than me which would have made it more problematic as well.

I am really risk-averse so we did not spend to the max (£50k lower mortgage than we could have got back then) which served us well.

So - I’d say go for it if it feels like the right time without trying to second-guess the markets.

Rent is payable til you die, even when retired.
A mortgage has an end date, normally paid off before retirement.
Rent will increase over the years, mortgage payments align to interest rates.
Renting is paying someone else mortgage towards their comfortable retirement.

I'd buy, it's a home, not an investment. Don't listen to the odd crow on MN saying there is a crash and houses will be cheap as chips or you'll miss the boat.

Save up the difference between rent and mortgage. Do that for at least a year, then reassess. You’re in a lucky position to be able to test out how it feels to afford the £1,100 repayment.

I would take advantage of the price reductions now and buy. The first 2 years of paying any mortgage are always the highest, then you can recalculate to a lower rate once the interest rates have gone down, but you will have invested the money spent.
Also once the market gets very busy again prices will rise and there will be more competition.

Always buy. Fix for 2 yrs. Look again then. Use a broker! 500 quid so so worth it. Not l and c a proper one someone you know used. Mortgages go down and you build equity. There's never a bad time, house falls are falls in growth not value usually and if you're going to live there long term irrelevant anyway.

I’d wait. Reductions are only just starting.
Inflation by any measure is out of control, people’s spending power has been reduced massively. House prices are only going down.
Keep saving, in a year’s time your 5% deposit should be closer to 10%.
Use the time to research the market, view properties and get a feel for the whole thing, so when something actually ‘good’ shows up, you’ll recognize it.
For example, a bathroom with quality fittings, good mixer tap, space for toiletries, a mirrored cabinet that is lit, tiled floor, great water pressure, immediate hot water, good shower, a window etc , compared to separate taps, p1ss poor pressure, tiny sink under the window, carpets, shower like a watering can, no window, running the water for 5 mins to get some hot water.
Same with electrics, cheap doors, kitchen, old cheap double glazing, no insulation, old boiler.
You really need to research and be able recognize the money pits.

in a year’s time your 5% deposit should be closer to 10%.

Say what now?!

They save £500 a month so an extra 6k on top of their existing £10k
Prices drop 10% so now they have 16k deposit on a 180k house.
Not 10% but closer to 10% than 5%

Prices will drop. There is No money to support them now the ‘free money’ has stopped.

I don't think 28% of net income is scary. That sounds very reasonable and average to me. You need to factor the cost of 2 years' rent into your calculations and weigh that against the potential for house prices to come down.

FWIW (and I'm not an expert, just someone who has observed the housing market over time like most) I can't see a huge crash on the horizon. I wouldn't be buying a house to flip at the moment, but I doubt you'll go wrong buying a home to live in long term.

We are in exactly the same situation so watching with interest.
We're looking to buy a new build towards the end of the year.
We're confused with brokers though. We've spoken to 2 and both have told us completely different things. One broker is free and the other will be £500. The free broker said we are limited to 2 lenders and rates of 6% as DH is on a visa but the other broker said this isn't true and our rates would be around 4-4.5%. We don't know who to believe.

Rather than looking at the market, interest rates, house prices etc, you need to establish how much it means for you to have mortgage rather than paying rent. Look at your budget, there is always will be some sort of market factor around but you need to think about what suits you best. Right time to buy house when you can afford it

Its the same where I am, in the North East too

The best time to buy a house is 20 years ago. The second best time is when you find a house you can afford and want to buy!

We are looking now as prices have come down locally and we feel we can get a decent deal and maybe even find a forever home on the first go.

In reality, there's always going to be some reason that you could use to not buy now. But also in reality, house prices always go up.
In 1999 the average home was £91k. Nowadays it's around £290k (Ex London).
So the best time to buy is when you are personally ready, and have found somewhere that you want to buy.

28% may sound scary, but if you think about it, that money isn't all being lost like it would if you're renting. Minus interest, you're basically putting that money into savings. Because then if you sold the house down the line, you'd get back a good chunk of that money, plus any extra if house prices continued to rise.

If you buy now and started with a fixed 2-year deal, by the time you come to remortgage in 2 years time, the interest rates should have come down a bit, with projections of 2.5% (vs 4.25% today) - as per quoted by the BoE's projections. So potentially after two years when you remortgage, your mortgage payments will come down giving you a bit more leeway on your finances.

@andymary 'the interest rates should have come down a bit, with projections of 2.5% (vs 4.25% today) - as per quoted by the BoE's projections.

The BOE appears to have projected inflation to be 3% in Q1 of 2024 which seems extremely optimistic. You seem to be comparing interest rates now with something else ? projected rate of inflation end of 2024. The interest rates will need to settle above the rate of inflation in the longer term.

I think it's very over optimistic to assume that rates will have come down significantly in 2 years and that house prices will have risen again. Both are unlikely unless we see hyperinflation and the currency worth nothing.

There's nothing wrong with renting. There's also nothing wrong with buying. The former gives you flexibility to move at the drop of a hat for a relatively low cost, the latter gives you an opportunity to acquire some equity, provided you are reasonably confident that nothing much about your willingness and capacity to service a mortgage will change for the next twenty years or so.

The mistake is to imagine that there is some ideal time where the market will favour you. That's not something anyone can predict. It is only ever with hindsight that you'll be able to pinpoint whether this month or that month was the 'perfect' time to buy. But by the time you know, you're already looking in the rear view mirror and if you didn't buy. the opportunity has already passed. It's a bit like picking last week's winning lottery numbers - easy to do in hindsight. My advice would be to do what feels right, and then never think about it again.

People telling you to keep renting have no clue. It’s never a bad time to buy, especially if you are renting. Trying to time the market is a fool’s game. People who think that waiting will mean they will pay less, end up renting forever.