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

Could you and your dp get a second job for a year to save more? I think the interest rate goes down as your LTV goes down so it would be good to have at least 10%

A 2 bed house is not tiny though. If you cannot afford a 3 bed house, have one child or have your DC share a room. You do not have to outgrow a 2 bed house. Many people manage to live comfortably in them.

I would be surprised if rates come down much but prices might a bit.

I would try to save a higher deposit while you have two incomes, low rent and no nursery costs. Maybe for a year.

And then buy what you can afford! With a bigger deposit- the risk of negative equity is lower and you will build equity more quickly.

How about buying a 2 bed, but one of them modern properties where you can easily do a loft conversion?

I would save as much as you can for a 10% deposit - you will get a better mortgage product and hopefully the market will have stabilised.

You can't live for free and you aren't going to get anywhere for less than £600 a month.

If prices continue to drop which all indications are that they will, then even a modest £14k drop means you are even stevens if you stay renting for 2 years.

As for living in a 2 bed house for evermore being ok, I personally would try and get a 3 bed house that is more long term and offers more flexibility.

I suspect interest rates on a 95% LTV will be eye watering because of the negative equity risk.

I would personally try and save as much as you possibly can to get to 10%, allow rates to settle and let the market dip

I really don't think there will be a crash but you might be able to get a relative bargain.

I agree with hold on a bit longer but save as much as you can - how much can you save each month? Have you got your deposit earning the best interest possible etc. I think planning to buy late 24/2025 will put you in a more secure position.

Why not try putting the difference (£600 a month) between mortgage and rent into a savings account for the next two years, whilst renting? That way you will have an extra £13k deposit, which will hopefully move you into the 10% deposit band and better mortgage rates. If you can, try to save more than this, say an extra £200 monthly, to allow for the fact that once you own your own home you are responsible for all the maintenance, need buildings insurance not just contents etc. That additional £5k savings will help with legal and conveyancing fees. Plus you will know for sure if that is realistic, budget wise. At £30k each, are you paying off debts, student loans etc? Or paying into pensions? Otherwise you’ve got more than £4k a month as a household, ie about 30% more than me, and I pay a mortgage considerably higher than you are proposing! It’s definitely doable, but you need to (a) practice living on less; and (b) boost your savings.

Thank you for doing that calculation! It’s really helpful to see it that way, I think I just need to shift my mindset

So (surprisingly) there is a minuscule difference between 90 and 95 LTV. We have been advised saving the extra five percent is pointless in view of this really. I think maybe we keep an eye out for a house in an area where prices are rising fast and hope for a bargain, suppose it’s a good time to get a bargain. That way reduced chance of negative equity if it’s an area that is always going to be popular and sell etc

You have secure housing at a very comfortable fixed rate, and you want to buy in a falling market? You are sitting pretty now.
As some PP said, start saving, start looking so you know your market, and reconsider in a year or so. Do not try and buy now, you’ll be in negative equity before Christmas.

This is a really great idea

The problem isn't the rates but how high house prices have risen in such a short time and because of short supply sellers can name they're price, 3 beds around my area have increased around 50% in the past 4 years alone, that's just unsustainable but some people have mortgage to the max in order to buy and are now struggling with the rates

With your very affordable, secure housing situation and the prospect of paying double with a very small deposit in a falling market, you would be crazy to buy now.
Keep saving as much as you can for now, monitor the market and see where things are in 12 or 18 months.
Second the advice about following movinghomewithcharlie and his friend alexgroundwater on twitter/YouTube.

Also, stop waiting for rates to come down because they won't in the short term. You need to wait for prices to come down to more affordable levels.

Thank you so much will follow the moving home with Charlie channel. Would it be silly to TTC renting?

Thank you

Not if it is a HA property with security and low rent
Or if it is rent to buy is there a limit?

Have a baby while renting cheaply and securely
Your costs are fixed
Why wait ?

If you were private renting
Buy now on as long a term as you can, 35 or 40 years. 2yr fixed or tracker. Overpay when you can. No dependents on mortgage. Remortgage in 2 yrs when rates are lower, adjust term etc.
But as you have low secure rent how much do you want to buy? Can you stay forever with kids where you are? If not as above.

We rent at 80% of market value

Re baby this is one school of thought for sure. Costs are cheaper here and will never be this cheap anywhere else plus it’s guaranteed to be fixed. Cons are that we don’t have oodles of space and it might be then hard to get a mortgage with a dependent.

It’s not a lifetime tenancy no, we can stay indefinitely but after 3 years the rent will go up from what it is now. We’d hope to have bought by then though

As someone who is currently in negative equity trust me DO NOT risk negative equity!

We bought 5 years ago, 5% deposit. Affordable repayments. Now in negative equity and mortgage about to expire. We can’t remortgage due to negative equity so we’re being forced onto the standard rate at 7.7%!

I wish we had waited and bought with a higher deposit to mitigate this risk. Now we are having to sell the house for less than we bought. Leave with nothing but debt and back into rented with our savings wiped out.

While your rent is cheap use the time to save the most you can and put down a bigger deposit to protect yourself from fluctuations in house prices. Particularly right now when the market is falling.

That's a good idea. When you look for an area that prices consistently rise in, make sure you look at house prices around crash times too. 2009, 2012-13. If prices didn't plummet too much even then, the area is bullet proof. Look on the land registry for this.

Please ignore Rightmove's 'prices have risen 20% in this area in the last year and 35% since 2020' - there are so many factors that skew Rightmove's data that it absolutely cannot be relied upon. You have to do the hard graft of working your way through LR, dismissing any massive abnormalities that are probably half a house extensions, those that have dropped from 600k to 90k where someone has sold to their child as a tax dodge, and just look for the more normal, regular figures to get an average.

You are right, the difference in mortgage offers between 90 and 95 % are bad ATM. But what has been even more shocking to me is watching the gap in savings between 90 and 60%. People with 35% equity barely got offered a terribly lower rate than us recently with a 5% deposit. It's gutting for those who have slogged their guts out to overpay and expected a better fixed rate by remortgaging. They got very little reward.

One more thing, idk if it applies to you. Right now, FTBs do not pay stamp duty on purchases up to 425k.

From 31st March 2025, it goes back to what it was - 300k.

Oh gosh this sounds so scary, I am naive (clearly) in this area as I had no idea this could happen to this scale, none at all. That is awful. So sorry that’s happened to you and your family. Was it a new build by any chance? I really hope you find a lovely home, rental or otherwise

Thank you! That’s good to know, I’ll go on a trawl for some info. Have somewhat of an idea as to where those places will be but good to have the stats to confirm it. It doesn’t apply to us as we’d be looking under 300k anyway but that’s a crazy drop that will affect so many people’s first purchases! Especially in those more expensive areas. Not fun.