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

They do it in times of uncertainty when they need to spend more time working out the market and what their products should be to reflect it. It’s a way of managing risk.

Some did it during covid and when Truss upset the markets. Their products were I’ll probably be back by next week but with different terms/criteria.

I don’t know what’s specifically happened today though!

Ah. Reading up on it now. Rates are going to rise again on Monday quite significantly. Also stumbled upon a new article from a credit agency warning house prices will fall by as much as 10% over the next 2yrs

Trying to time the market will always cost you more OP. Buying as soon as you can will always be the right option.

Time will tell.

A lot of fixed deals have gone up .5% in the last week.

Gosh that makes me feel quite sick! Guess we better stay where we are for now

Buy a stonebridge home we have 1 it's a really good home

If you are younger than 30, save hard for 12-18 months to buy, then TTC. Hopefully interest rates will stay stagnant or reduce slightly, along with house prices, I'd be amazed if prices continue to increase. Your rent is low, with your income you could save £15-25K, depending on how frugal you are willing to be for that time.

What is the £ difference between a 2 and 3 bed and would £25K extra deposit bridge the difference? If not, then what is your plan to afford a 3 bed once you have young children? You can't bank on house prices crashing. Unless you have family willing to do childcare, with nursery fees and/or reduced income to work pt you could easily be £1K down each month. So even if your DH's earnings increase over the next few years as you plan, it may only put your disposable income back to where you are now.

I'd buy a 2 bed in a nice family area near a good primary school, overpay the mortgage where you can, then sit tight until you're out of the childcare years and reevaluate in 5/6 years.

My son is on a similar scheme as you
rent to buy -
he was actually in the process of buying the flat but the ground rent issue stopped it
luckily the HA allowed him to get on the scheme and rent it

so he is renting a gorgeous 2 bed 2 bath flat at 850 a month
normal rent would be around 1400
it’s a deal with the HA for 5 years

But he has already got at a min 52k deposit and could get it up to 60k if necessary so he’s got at least 20 percent for most houses / flats where we live ,

but we live in an expensive city in the southwest and houses are expensive and flats only slightly cheaper

But what I have noticed is that there are a lot of family type homes with no chain coming on the market in the last few months

lots have been reduced as well
one was reduced from 325 - by 25k this week and was only on RM for 2 weeks

he has 2 viewings tomorrow with the same estate agent which he set up at the start of the week which would have been unheard off last year when you had to open days

When I sold my parents house in Nov 2021 it sold within 2 days for 350k. - 30k over the asking price
2 bed Victorian terrace dooer upper

I think with a really cheap rent and pre children you should be saving hard. If you can’t do it now it’s only going to get worse! Then buy the property you want but don’t fritter all your money away whilst you’ve got such a good deal x

If you buy when you have kids I think the amount you can borrow is reduced as you then have dependents , childcare

if you have such cheap rent how come you aren’t saving much

You haven't got kids. Buy as big as you can and get a lodger.

I bought for the first time in 2001. I earned £22k but was lent over 5x my salary as the market was more lax then. My mortgage on that flat in 2001 was over £900 a month. So i got a lodger. Half my friends waited as they thought there was going to be a massive crash. There never really was.

Now, in my 40's there is a huge disparity between those of us that bought in 2000/1 and those that waited until 2004/5. Literally the difference between big detatched houses and 3 bed semis.

Lets say there is a 20% crash (unlikely) what do the numbers look like for you then. Will it actually make that much difference to what you pay overall (bearing in mind rent is wasted money). Can you fix a mortgage? Anything under 5% historically was cheap. Obviosuly if you are buying something worth £500k a 20% crash is a lot of money but £200k not so much really over 25 years and if you buy something you can stay in for a period of time you will ride out any blip in the market.

In my view anyhow the low interest rates we have just had were to allow all the people in the 90's that took out interest only mortgages the chance to catch up.

Alternatively be happy you have HA accomodation and just stay there. But if you want to buy i would get on with it with low offers. Protect yourself from the falls as much as possible.

Well oh dear. We have decided we can’t buy somewhere unless we have a 10% deposit, some of you wise PPs led me down a research rabbit hole and you’re all very right. Almost perfectly, a nearby development is offering 5% deposit contributions. Great - we’d have 10%! The development has been going 5 years and is nearly complete. I’ve just stumbled upon one of the exact same houses listed on rightmove that was bought 5 years ago, and it’s going for £20k less than the developers want for the new identical model. Wow. So if we moved, our 20k deposit would send us into negative equity fairly fast!

That situation has almost always been the case with new homes. Some want to choose fittings and have new shineys, but they do depreciate once "second hand".

Can't you buy that one then? It's already depreciated and you are planning to live there at least 20 years so would avoid the trap that way.

20 k must match the additional 5% if it was a 400k house I'm assuming less so even with 95% quids in and you like that model.
Rent is thrown away so some negative equity or breaking even still saves your 600 a month

Anyway negative equity is only relevant if you move. 5yrs is quick to move from a new build. Buy a house for 25 to forever years not 5! It's a home not an investment. If your kids to be grow up there you may well stay forever.

I don’t think 5 years is quick for a first house, a first house is often a stepping stone at a time where people lives are changing a lot in terms of income potential and family size.

We were in our first house for 3 years, in that time our household income almost doubled, we had 1 child and become pregnant with a second. All things that would make someone ready to move on! If anything I think first time buyers should be more more wary of negative equity than others.

We had negative equity as a FTB.

1991 - 1994. 10% drop.

OP just buy a two bed!! Me and my DH started our family life 16 yrs ago in a small 2 bed cottage, at the time the house was worth about 130k , we have moved ‘up’ the housing ladder numerous times since and current house worth over 1m. My point being you need to start somewhere to get where you need to be. We also have friends who sold up and came ‘off’ housing ladder thinking prices would fall and they would get a bargain but sadly that never happened and they are still renting many years on!

Rent is thrown away money, but mortgage interest paid to the bank isn’t?

Anyway, rates are going up, prices coming down.
Anyone buying now either needs to have built a lot of equity ( free money ) already, or drive a very hard bargain, like 20% off asking.
Even then, with all the kite flying, 20% off may not be enough.

That’s the problem with new builds. They very often do seem to depreciate over the first few years, because the thing that was most attractive about them (being brand new plus developers incentives) disappears once you move in.

You would be better off financially to continue saving for a 10% deposit and buy a property in a great location that will always be attractive to buyers. Prices aren’t rising so you won’t miss out by leaving it another year, if you can cope with your current living situation a bit longer. You may get a better property for your money if you can be patient though I’m sure it isn’t easy.

That one would presumably need a 10% deposit though which OP doesn’t currently have.
Only the new builds carry the incentive of the 5% deposit supplied by the developer.

That is just an anecdote from someone who was born at the right time to make lots of money on their homes.
The situation now is totally different.

@rainingsnoring simply not true. The value of each house has increased usually by a relatively small margin. We have also bought two dilapidated doer- uppers and spent all our time and money for several years on each one and yes we ‘made’ more money on those but we sacrificed a lot and have never bought a ‘made’ house, even our current home needs work which we are working through slowly.
i bought my first home around 20 years ago on a 105% (yes you read it right!!) mortgage interest rate of around 6% it took around 40% of my modest public sector wage and was tough.
My point is, buying what you can afford NOW gets you on the housing ladder and paying down a mortgage-for the vast majority this should get them on their way to eventually building up equity and having the opportunity to move ‘up’ the ladder as time moves on.