First time buyers… do we buy now or wait and hope rates will come down?

[treesareyellow]

The whole situation is a mess.
Hardly anything on the market near us, understandable reading some of these posts as it’s clearly not a good time to sell

We are renting for £600, a 2 bed. HA on rent to buy scheme hence why so cheap. We want to buy a 3 bed. We earn jointly 60k so this should be reasonable in the north and merely a few years ago we’d have been able to comfortably afford this with repayments of circa 800 a month - except we were students then so obviously we couldn’t buy then. In current times with rates as they are we would be paying over 1100-1200 on a mortgage for a small 2 bed! We have just scraped by the affordability for it but it would be over 30% of our joint income and considering we want kids soon I think that would be really tight when on reduced earnings/maternity etc

Often see it suggested to buy a very small property. It’s completely impractical for us to buy smaller than a 3 bed (2 bed and box room) as it just shifts the issue, if we outgrow a tiny property then try to sell it in two or three years we may be in negative equity which we want to avoid as then we would be stuck. Anyway, all the starter properties around here are either occupied by people who now presumably can’t afford to move on or snapped up by landlords within days. Flats and apartments are not as common round here. We don’t want to pay another lot of legal fees and deal with the stress and hassle of moving either.

We know trying to time the market is a fools game but should we wait given the rent is fixed? It feels like such wasted money but I am scared of strapping ourselves into ££££ of mortgage debt with repayments being so terribly high, especially at the time we’re thinking of starting a family you don’t want to be an extra -600 a month down.

Thank you

Do I just need to accept we simply cannot afford it, despite earning £30k each? It feels very demoralising. I wish we’d never chosen to rent but we wanted to practise living together before committing to buy.

Buy now

We can’t find anything that would be cheaper than £600 a month more than we already pay.

3 bed or 2 bed. I'd get on the ladder with a 2 bed if needed

I wouldn't wait for rates to fall as I don't think they will anytime soon.

But house prices are falling so could you wait and get one at a better price, that would compensate for the rising rates a bit?

Why?

I think you're right to wait for a 3 bed.

No rush to buy in a falling market, take your time.

No point buying a two bed now only to need to move again in a couple of years when it might have lost value, and paying two lots of moving costs.

I'd save as much as you can in a high interest account - could you have a LISA?

How old are you? Could you hold off TTC for a bit?

How much of a deposit have you saved and what's your ceiling?
I'm surprised that you're saying it would be £1,100-1,200pcm for a small two bed. I'm in the process of buying a 2 bed for £160k in the midlands and my repayments are approx £640 with a 20% deposit. I've seen a few 3 beds for under £200k so maybe worth taking time and shopping around, plus go in low with offers?

Equity. At the moment the money is just going to pay off someone else's mortgage.

Can't guarantee they'd have to move though. They might never need 3 bedrooms

What % deposit do you have?

5%! Oops shouldve said that

I would spend the next year saving as hard as possible to increase your deposit. Put savings into a LISA. No takeaways, holidays etc. If you're buying with someone else and your rent is only £600 then you could be saving a lot more. 5% would feel way too risky for me.

Of course you can’t, that’s ridiculously cheap. A house is an investment and will cost more- it’s unrealistic to expect to pay £600 or less on housing these days

I would buy a cheaper two bed flat or house now. It might take a year to conceive. Then 9 months being pregnant. Then probably a two year gap before having another baby. Even if you have a second baby it sleeps in your room for the first 6 months. So you could potentially be ok in a two bed for quite a few years before needing a three bed.
I'm in a two bed currently with a baby and it's fine. Would prefer a 3 bed and will move eventually but meanwhile we are paying off our current mortgage as much as possible to build up more equity and have the security of not renting!

There's never a perfect time, if you can afford it buy now, things may get worse or better who knows, buy now and you are on the ladder.

I agree with this. It’s not about waiting for rates to come down, but house prices are falling and you have a low rent now so this is the best opportunity you have to save.

OP, follow Moving Home with Charlie on YouTube. He posts almost daily about the current state of the market and has v useful timely advice for ppl looking to buy. Watch his live video yesterday.

Thank you this is really useful.

If you buy now with the amounts you mention, with 95% LTV, on a two year fixed term, in a market where house prices are falling, you are at high risk of negative equity, especially if you take a mortgage with a 2-3 year fixed term.

For a lot of us, it's no longer cheap to buy the quality of home we are currently renting.

You would be wise to keep saving for 18 months - 2 years, wait for the prices to settle (read: lower) and save as much as you can to mitigate any future risk of negative equity.

Negative equity is especially important to consider when not buying a really long term home. It means you cannot afford to leave that house.

Be aware though, government incentives are always changing and/or vanishing. The reason so many people can get 95% loans at the moment is because the government has backed the banks to take that risk.

That backing really may go away, and you may find very few lenders will give 95%.

To be extra safe, I would plan to save 10% if you can.

You only get FTB stamp duty relief once, so its sensible to go in at the level of medium longevity small family home if you can afford it. Buying 3 times going from a 1 bed flat to 2 then 3 is becoming a bit of a financial nonsense when absolutely everything is so expensive.

How’s that equity gonna look if house prices go down? Also, say they buy something at £150k - they will be paying at least £625 a month interest alone - how’s that for dead money?

Oh i read this as it would cost them at least £600 more than its costing them to rent

This is pretty smart.

Aww, fanks.

I have spent a great deal of time NOT buying our first (and probably last) home over the last two years, have learned some stuff along the way.