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

I had no idea also and was quite naive.

Yes it’s a new build bought on the help to buy scheme. We could afford it on the 2.4% mortgage we got. We could also afford it if interest rates rose a little. We never expected to be forced into 7.7% which we can’t afford but no one will give us a mortgage due to the negative equity so we’re stuck with that which is the rate our current mortgage rolls over onto once our 5 year deal ends.

I’d buy a 2 bed now. You might not even need a 3 bed in 2-3 years. Even if you do, there’s a chance it will have increased (although it may have decreased).

The property ladder works by starting off buying a small, often worse property than you’d like, not going straight in for the family home, it’s just unrealistic. In my opinion it’s so much easier to get on it before you start having kids. Once you have maternity leave / child care / dependent issues it all gets more tricky.
The first few years of property ownership are often the toughest. Much better to do this before kids.

If you could get a 2 bed with the potential to extend in the future, that would be your golden property!

Was it the equity loan that was most unhelpful in this scenario? They’ve stopped this scheme thankfully now, I think more people should be taught/warned about negative equity though. It’s all well and good promoting schemes to get first time buyers onto the ladder but it’s not sustainable if they can’t afford to stay on the ladder

This is a good idea!

It was the 5% deposit that was the issue. The equity loan topped our deposit up so we only put in 5%. That meant when the house value dropped more than 5% the tiny bit of house we actually owned (rather than the bit the bank and help to buy own) vanished.

Had we put a 15% deposit we wouldn’t be in negative equity. Then we could have at least secured a new mortgage to bring the rate down.

The help to buy scheme did nothing but commit people to buying houses they probably couldn’t afford and new builds always lose value at first so meant negative equity was a big risk but we didn’t understand this or the impact of it until we were in this situation.

It was a good idea up until 2021.

Now a single storey extension 4m x4m will cost you 44k.

My cousin just finished a crappy two storey extension that looked to be about 2m wide and charge his client 75k for it. That's without windows, doors, rooves, or ANYTHING inside.

The average loft conversion now costs 65k.

It used to be a good idea. Right now, it's a terrible idea.

Oh dear! Likely not this then. Wow. Don’t know how people find that sort of money

I see! Thank you for explaining. It makes the prospect of the 100% mortgage seem bonkers.

Homeowners' equity loans, payrises, bonuses, credit cards, living in expensive areas that rise massively in value, moving and cashing in.

Iirc when you remortgage you can also ask for a bunch more money for home improvements, but I think the bank will check that the house is actually worth more now, and that you have paid off a chunk of your mortgage.

People find ways. No longer having to pay for childcare. Not having to support teenagers. Putting up with shitty cars.

Personally, I want no part of it. It's far too stressful to be in situ with those kind of works.

It depends where you are in the country and how you go about it.

We’ve just been quoted £18k by our builder in the NW which we don’t have at all right now but wanted a ballpark to save towards. We’re renovating so we put in the infrastructure (veluxes, wiring, etc) as that work was being done which has massively reduced the estimated quote but only cost £3k more on top of the work we needed.

You should wait, both prices and intrest rates will come down. Intrest rates will go up further first, causing further house price falls. You will get a better property if you wait for sure. Keep saving as much as possible.

with 95% LTV, absolutely do not buy in this market. Especially when you have a cheap rent.
Be out looking for real bargains but wait!

Thank you. Would it be silly to TTC while rent is so cheap?

sorry I think you're asking the wrong person :)

I think the difficulty with TTC now whilst your renting is that it will be so much harder to get onto the housing ladder later.

If you work full time childcare costs will be well over 1k each month, if you don’t you’ll have one less income and more dependents. Either way you’ll be able to borrow substantially less than you are able to now.

But I also think it is very unwise to buy with a 5% deposit right now. Maybe if you fix for 5 years and still manage to save a decent amount each month after you’ve moved that you could add into the house to avoid negative equity but it seems like a very risky situation with only 5%. Whatever you do don’t buy a new build with that deposit.

It probably depends how old you are, if you were in your 20s I’d say save hard for another 18 months so that you can have a higher deposit. Then buy whatever you can afford.

If you’re in your 30s then either buy something at the lower end of what you can afford (so that you’re putting down more than 5%) yes it will be a 2 bed or in a worse area or TTC whilst renting and accept that if you want children now buying will be much harder (but not impossible) later on.

We bought a 2 bed in a good area near a great primary school when about 6 months into TTC thinking it was a great to be in a better area than get a bigger house, then intention being to buy a bigger house when child number 2 came along.
In a nutshell, ten years of TTC/fertility treatments and we a unfortunately still childless BUT still in our 2 beds as it's a great area!
Don't knock buying a 2 bed to get you on the ladder if that's what you need to do, you don't know what the future holds. And even if you do end up with a couple of kids, a 2 bed would be fine for at least 5 years with room sharing, giving you chance to continue saving for bigger house.

@Madwife123 have you been to money helpline or national debtline and definitely checked out all of the options available to you? Selling at a loss and moving back into rented with debt now should be the absolute last resort and you need help to find a way to ride out the negative equity for a few years. Things that spring to mind, but there may be others: (1) getting special permission to rent out your house rather than sell it, and then move into a cheap rental. (2) moving to the offered variable rate but changing to interest only, which should reduce the mortgage to the level of a repayment mortgage at your current rate (3) also extend your mortgage term for as long as possible, even into retirement age, to reduce the monthly payment. (4) you can negotiate with your lender to get a better rate if you have a clear payment history with no arrears. You might need help from the above organisations to negotiate with your lender.

Bear in mind that any dependents/costs of childcare will be factored into the amount of mortgage you’ll be offered. I would wait to buy to TTC.

Is buying with a 5% deposit a really bad idea? I said upthread that we’ve had advice to just do it since there’s little difference between 90 and 95 LTV.

If you can save more for a deposit, do. I think you’ve said you have 5%, which really limits your options and will lead to worse rates (I know, I did the same and would strongly advise against it).

House prices are supposedly going down, though I think stagnant is more likely so you have a little bit of time. If you can get to even 8% or just anything over 5 it’ll help you.

I don’t think you are planning to but just a caution - do not go on any of the help to buy style schemes, because the property devalues rather than increases the moment after you purchase.

You sound young (sorry if you’ve said) so you can ride out the rates for a bit - maybe a year - and the house prices shouldn’t raise dramatically in that time * you’ll have been able to save some more.

Personally I wouldn’t hold off TTC because you never know how that could go

in terms of the house I think 5% is a little risky because properties are expected to go down by that same % so you could well be in negative equity when you try and sell or remortgage - the latter being difficult if you need to go on their much higher standard variable rate

so saving a bit more will be really helpful - and not in terms of reducing the interest rate as I expect the difference to be minimal

but one thing- you can certainly raise two kids in a 2 bed - you could buy a 2 bed with potential for loft conversion (it could be pricy doing a loft but at least there’s the option) or the two kids can share whilst they are little - in fact lots of kids love that.

so if you definitely can’t afford a 3 bed that equal a huge disaster

• Whoops - meant to say: that does not equal a huge disaster

Not a good idea when the housing market downturn is starting.

I would wait to see how low the market goes, in the south of england they are dropping, perhaps reconsider with higher LTV when dust has settled a bit more.

You may end up in negative equity and unable to move. How secure is your income?

My partner and I have not long bought our first home in our 20s and the mortgage (without extras like buildings and life insurance) is 30% of our wages. We're not in highly paid jobs, I'm band 6 NHS. We feel comfortable though and still have money left over. I think the difference is we are southerners and where we were renting before was a lot more than our mortgage, so despite being high we feel like we're saving money. We made the decision to do it now as we don't think the situation will be improving much and we'd rather at least be starting to pay our own mortgage off rather than someone else's.