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

Interesting. Are you in an especially desirable area? Commuter belt, uni town, quaint market town down the road, AONB?

The negative equity thing is a complete red herring. It only matters insofar as you one day need to get a specific mortgage deal in order to keep making payments, or if you need to move house. In the first instance ... if you can only afford a mortgage during the discounted initial 2 year fixed or tracker period, but not during the subsequent 23 (or 28) years that are spelled out quite clearly in the mortgage documentation, then you can't really afford the house anyway. In the latter case - very few people genuinely need to move house. Many want to, but that's not at all the same. You have considerable control over what you want in your life - children, career changes, better weather, nicer garden etc. Doesn't make it a need.

If you can avoid either of those scenarios - which you can, by not over-extending now, and by not changing your circumstances - then you should buy, and the sooner the better. Anyone who says 'but what if rates come down in the future?' doesn't understand how mortgages work. If rates come down, so will your base rate. You might be trapped at the higher fixed rate you committed to for a while, but there's normally a fee you can pay to redeem early and you can calculate whether that's worth it or not based on whatever the next best alternative mortgage you can get at the time. And of course - if rates come down and you haven't bought, then prices would rise to balance out any benefit from cheaper debt. And you'd still be older than you are today, with less equity. Far less, in that case. So buy - but only somewhere you can actually afford.

They benefited from the covid house price boom. We bought in 2020 and sold in 2023 (after house prices had already started to come down) and we got 20% more than we paid for it.

Not a very normal set of circumstances though and I can’t see that happening again for a very long time.

If you have a secure HA property which is half the cost of mortgage on similar and no maintenance costs
Then stay where you are but continue to save few years , habe z nany
Then potentially you gzvd high salaries bigger deposit
Stay in work with two incomes

Have a baby if you want one

Really bad idea. If house prices drop more than 5% you're in negative equity. If you need to sell, or your fixed rate mortgage comes to an end, it's a terrible position to be in.

You really should be saving loads while you're renting for such a small monthly amount and don't have childcare costs.

Save like mad and don't rush to buy a house now. In 12 months, house prices will be lower, inflation will be lower, interest rates might be easing down. Buy your 3 bed and start your family.

That's the best financial decision imo.

Thank you. Yeah I’m worried about negative equity in that scenario. I just wish they would make it clearer to people that in some cases a 5% deposit buying might leave you in a more jeopardised position than just continuing to rent!

Getting a mortgage at 95% is just renting from the bank with maintenance costs as well
espec if prices go down
You have a secure rental and no maintensnce costs
So no rush
It does not seem you going to get a bihger better property to live in for 2x the price monthly right now

Thank you x

@cestlavielife has nailed it. You’ll be in a much, much better position in 36/48 months time.
Reconsider your position then.

Don't wait to ttc though if you are over 30. It's not worth it. Would you rather be in a rental with kids or have left it too late? We had 2 kids renting, got married, bought then had another. You don't have to follow set rules. If you ended up with 2 kids in rented but still ha you'd be fine.

Just to point out something important that keeps getting glossed over ... your fixed rate mortgage doesn't come to an end after 2 years ... the initial discount used to lure you into signing up for 25 years ends ... but you still have the mortgage. Nothing changes. Your payments in month 25 are absolutely crystal clear and explained in painstaking detail in the mortgage agreement you signed. You won't lose your house. You don't have to re-mortgage. You can keep making the payments and pay off your home over the term of the mortgage. It's only if you signed up without the means to pay what it will cost in month 25 that you are f@(c)3ed.

This is misguided information. When the fixed term ends you don’t know what rate the mortgage will be for the remainder of the mortgage, whether SVR or another fixed.
also loan to value (house price dependant) changes this cost.

No it doesn't. SVR is SVR. Doesn't matter if you signed up a year ago, a decade ago, or any other timeframe in between. LTV is used to price a new mortgage product. But anyone coming off a fixed rate or tracker deal has an existing mortgage. The SVR can rise and fall, as will a tracker. But the mortgage exists and there is no 'new' or 'additional' premium applied midway through the existing mortgage.

Yes your payments at the end of a fixed rate period are painstakingly set out in great detail, but nobody could have foreseen the events of the last year. I've remortgaged a few times over the last decade or two and looked at the paperwork and virtually every mortgage has said "you will then revert to the standard variable rate which is currently 4.24% (or thereabouts). It's only in the last year that the SVR has increased to levels not seen for many years, so you can't blame people for not expecting rates to be over 7%. It will happen a lot more now since they stopped stress testing.

That’s true. Thank you

Even when they are set out the quoted SVR is current one which, when you get there, might be different.

Given the current regular increases in rates its likely to be higher than what is painstakingly set out. Possibly a lot higher.

Of course, if rates drop, it could be lower.

It’s all so daunting

@treesareyellow - completely understand how daunting it all is, there are so many variables.

One of the biggest is the age of you/your partner. I’m going to answer as though you are in your twenties.

I agree with a pp. Priority for now would be saving the difference between your HA rent and a possible mortgage payment. I think you said the difference per month would be around £600. Even if you only save £4-500 of it for a year it would a) give you an idea of how it feels to live each month paying out that money; and b) would build up your savings for a deposit. Ideally, go for a savings account where you can’t touch it for that year, you’ll get a slightly better rate.

With regards to TTC, I can’t comment fully as I don’t have kids. But, from lots of posts on here and reading elsewhere, I would advise caution if you really want to buy a home. Having a child will play a factor in your affordability checks when applying for a mortgage.

I also agree with other pp’s re your first house. Don’t discount a 2-bed completely as your first home. When the time is right, it might be sensible to start off with a 2-bed. There is nothing wrong with young children sharing a room for the first few years of their lives.

The most important thing for now, given your HA rent amount, is to start upping your monthly savings - it is an advantage that you should absolutely maximise while you can.

And, when you do come to buy, be sensible. As long as the structure is sound, don’t worry about it being insta-worthy. A slightly crappy house in a good location is fine - take pride in making it your own over time. Structurally sound, neighbouring houses look ok, decent schools, feels safe - all good. Crappy decor, tired kitchen, unloved garden can all be sorted over time.

Also, when applying for your mortgage, check that lenders let you port your mortgage (ie staying with lender but moving to a new home). Can make things a bit easier if the time comes to move upwards from a 2-bed etc).

Am going to be very boring with my final comment, as it’s a repetition. Start saving the difference between HA rent and mortgage asap.

I think the biggest thing nowadays will be the adjustment of expectations for FTB & upsizing.

I'm an old-timer & when I first bought in the 90's interest rates were really high - so we all started off in 1-bed flats which needed tarting up.

Then credit became cheap, so it was easy to trade up in a rising market.

And then FTB could get something pretty decent because interest rates were ridiculously low.

Now we're in a situation where property is hugely expensive & interest rates are high, so it really is a double whammy.

The market needs to shift downwards & I believe that will happen.

Hang in there OP & save your pennies meantime.

Wait.

Not sure if it's been mentioned as trying to flick quickly through the replies but HSBC has pulled all its mortgage deals for new customers so that's probably your answer.

The comments that you know what your mortgage payment will be are flawed.

Most mortgages revert to a variable rate after the fixed term ends.

In 2006 when I got a mortgage the SVR at the end of the fixed term was only slightly over the base rate.

Then the base rate dropped and the SVR on my mortgages since then has been increased to higher % points over base rate.

Now the base rate is increasing and it's painful.

The v in svr stands for variable. Therefore you don't know.

Heard something the other day that the UK is one of only few economies in the world that works in such short term fixed mortgage deals. Most countries have the rate fixed for the life of the term. Surely that is way forward?????

Prices are certainly dropping round here and properties in the same road as houses for which there were bidding wars are now sat on the market for months and then reduced.

The cost is works is also eye watering

Hi ladies

Long shot -but we are trying to sell our detached home situated in Whetstone. It is conveniently located near 4 train station and great schools for catchment.

The house has been recently renovated with everything updated so it's ready to move in,

the link below has more details e

https://www.rightmove.co.uk/properties/135497576

if anyone is interested please message

Oh wow why might they have done this?