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?

That is a very odd attempt at analogy @Mark19735. Unfortunately, it has no relevance at all to the housing market or stock market, not even close. Heights have no whatsoever to do with prices and markets.

Perhaps you have not heard of mortgage valuations. They are most certainly influenced by recent sales.
Out of interest, do you believe in house rises at all? Do they even exist or does every single property in the country need to sell to prove that it has risen in price? I haven't seen you arguing that the statistics are made up of irrelevant on the way up. Is it just when the market is falling that you don't think one can extrapolate at all?

Just to remind you, the OP here has a 5% deposit so is very vulnerable to negative equity.

@Evelynbrown all good points.
That stability of owning comes at an opportunity cost though. You are restricted to working in your commutable area. Fine if you are on say the M4 corridor, inside the M25, in or next to a big city.
Not so rosy in Scarborough, west Wales, Cornwall. I think young people trying to build a career, and salaries, can benefit from the flexibility of renting. Obviously many exceptions etc.

Will you be likely to fairly quickly outgrow the type of house you are looking at? If not I would start saving the extra £500 a month and start tentatively looking and see if you can get an offer of about 10% under asking agreed. I wouldn’t be too worried about 28% of income personally but I guess it depends on the level of income you have and other commitments.

I wouldn’t buy anything that you will quickly out grow or by anything that needs anything other than cosmetic work at the moment (and I say that as someone who always buys houses that need work) . Also be very fussy on location.

I will have paid my mortgage off in 3 years and have a £500 k asset. I would just get on with it. There were plenty of years we struggled but we would be paying endless rent.

You are quite right - I don't believe in intangible house price rises based on changes in some index either - not until any hoped-for gains are actually realised by a genuine sale for real money. That did happen, though - many, many times during the last twenty years. I do accept that some parties - lenders in particular - use house price sales data as an input into their risk models to determine whether or not to lend to a prospective borrower and if so, on what terms - but those models also use many other variables such as age and occupation of borrower, so you cannot claim that variations in house price indices alone will determine the actual price to be achieved by the next sale - even in those instances where it is funded by a mortgage.

Those dinner parties that allegedly happened back in the early 00' where Guardian-reading Lib-Dem voters bragged about the increasing value of their house? Never went to 'em.

"Fine if you are on say the M4 corridor, inside the M25, in or next to a big city.
Not so rosy in Scarborough, west Wales, Cornwall."

And that's why houses in the M4 corridor, inside the M25, in or next to a big city attract a premium over houses in Scarborough, west Wales, and Cornwall. It's almost as if there's some invisible hand determining prices, and it is based on demand and supply of jobs (rather than oscillating up or down based entirely on the previous price achieved by a neighbour, as others on here seem to be claiming)

The HPC massive would be much better served if they devoted their efforts to improving wages for all, rather than undermining house prices in order to "punish" those they envy and profit from their demise. Because that's never going to happen. Owners hold all the cards. Always have.

From Cornwall, outskirts of Plymouth, our house has increased six-fold in value since we bought it, or so we are told. It is a lovely spacious house with great views. Wages and salaries haven't kept pace. So the family that will buy our house, when we are ready to sell it, will need a salary or assets, much much larger than we needed but probably proportionate to the money we had to find each month in the 1990s as a % of income.

Interest rates have gone up, so mortgage payments have gone up. The market will take a little while to correct, so it's likely house prices will go down slightly (probably by 5-10% in actual money, though more in real terms correcting for inflation). But then they'll start to go up again in a couple of years with inflation.

If you can get a deal for 5-10% less than what you would have offered a year or so ago, then it's a good time to buy, as I doubt if interest rates will go up by much more.

Payments might seem eye watering now, but in a few years your rent will have gone up but your mortgage will be very similar so will seem cheap in comparison, and you'll be able to get better deals as your LTV will have gone down from 95%.

At least you are consistent with this@Mark19735
Fortunately, I've never encountered people who brag about their house price gains.

Keep saving and wait at least until interest rates stop rising. You will be in to negative equity in a flash if you buy at the moment whilst the market is re adjusting to the new normal costs of borrowing.

The market has already fallen 5-10% and more in some areas.
What makes you think the market will go up in a couple of years with inflation?

Falls in the housing market usually take several years to get to the bottom and then stagnate for another few. What makes you associate house price rises with inflation? At present, real wages have fallen.

Even the Head Researcher at Zoopla (with a significant vested interest in prices going up) thinks that we will see stagnation for a decade:
twitter.com/richard_donnell/status/1642096169898725377

At present, no one knows exactly how much interest rates may rise or when they may or may not fall. It can be dangerous to assume things.
No guarantee that the LTV will have gone up in a few years, negative equity a very real possibility with a 5% deposit.

Every time I’ve bought a house it’s been the wrong time for some reason or another.
But looking back over several years every move worked out financially.
It always seems like a bad time to buy at the time but particularly if you’re renting you should go for it. This is your home, not just an investment. (I also don’t think 28% is bad either).

The market has already fallen 5-10% and more in some areas.
What makes you think the market will go up in a couple of years with inflation?

Because it always does - you won't find anywhere where house prices are still exactly the same as they were in 2008 for instance. Unless there are some really serious problems with the market in a specific area (the main industry providing work has closed down for instance) house prices will eventually start going up again when the market catches up.

They don't stagnate that long - see the average house price graph from the ONS - https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/january2023 which shows even after 2008 there was a brief decrease in prices and then they went up again. People have to live somewhere, and with rents also high there's still a lot of demand to buy.

Real wages have fallen because inflation is so high so they're not worth so much, they haven't fallen in absolute values. There's a shortage of workers, so that should cause wages to increase in the long run.

No guarantee that the LTV will have gone up in a few years, negative equity a very real possibility with a 5% deposit.

Yes, if a) House prices fall significantly more; b) They have an interest only mortgage so none of the loan is paid off; and c) They want to move at exactly that time instead of staying put for a little longer, and without buying their next place which would also be cheaper.

The FTB that are in more trouble would be the ones who have already bought at the top, not those who can pay 5-10% less now. And even they should be OK if they can afford to wait for a bit.

@NerdyIsMyMiddleName past performance is no guarantee of future results and investments can go down as well as up! I think people assuming that the relatively recent property booms will continue forever are naive.

Looking at the chart you linked and this similar one https://www.economicshelp.org/blog/5709/housing/market/ prices fell from 2007 and didn't start to rise until 2012/13 so 5-6 years, definitely not 'a couple of years'. The difference is relevant in terms of fixed mortgages and especially for people with small deposits.
This rise in 2012/13 was on a background of extremely low interest rates/ QE and Help to Buy (introduced 2013). Now, we have much higher rates which are not falling and may rise further, QT and Help to Buy has ended and no replacement announced as yet. None of the current circumstances are likely to cause a rise in the short-medium term (barring hyperinflation).

There is much lower buyer demand at present because they can't afford prices. In the meantime, houses on the market have increased compared to 12 months ago.
Re wages and jobs, we are likely heading for a recession. Even if we avoid a statical recession using current ways of measuring, job losses are expected. There was a shortage of workers in 2021 but this situation has now changed, reversed in some sectors and is going to worsen through 2023. I'm sure everyone would love a 20% rise this year, in advance of inflation and tax rises but it won't happen. If it did, it would likely lead to more tightening to attempt to reduce inflation.

Also to note, this ‘full employment’ is obviously nonsense. There are so many people working 16 hours, then getting UC and HB on top. The equivalent to a £50k salary!
They are not net contributors, and one of the reasons the government is skint, and the markets are saying no to more borrowing.

Hang on for now. You might over pay

I would hold off if you can, DS1 is waiting till ‘24. Let the market stabilise.

I e been thinking this for the last 10 years or so- house prices definitely cant increase any more...

If you are in a position to buy,.I would buy.

I think you will regret buying because in all likelihood there is going to be a significant drop in prices by next year. Wait til next year.

I feel you read the first sentence of my post than ignored the rest. 😅

I did😂