Is now a good or lousy time to buy as a first time buyer?

[FlyingSoap]

Ideally we’d buy a house before baby arrives, but the interest rates are seriously putting me off.

My friend bought a home in 2021 and was telling me her repayments are still only £700.

On the same house value / size, ours would be £1300.

I’ll be on maternity leave in 6 months time, so reduced income. Our rental is secure and half the price of what a mortgage would be, but it’s in the back of my mind each month that £650 will never be seen again.

I try to keep an eye on the market but haven’t been following Martin Lewis lately, does anyone know when rates are likely to come down a bit? Understand they’ll never be super low again but hoping for more like 3.5-4%?

If you need a house buy a house. There's no reason to look backwards at what was only looking at what can you afford now, and you're right. You want to buy before you have a baby or you'll be looking at a number of years before it will be affordable again.

Lousy time!
If you have a cheap and affordable rental, it doesn't make sense to take out a huge loan at present. There is no need to buy before your baby arrives. Do your best to save up as much as you can and improve your deposit. Rates may come down a bit at the end of the year (or they may not!) but this is likely to be accompanied by recession and more people losing their jobs.

If you take out a mortgage for 1300 a month, a chunk of that goes into serving interest - so that's also money you'll never see again.

You'd have to compare the interest part of the mortgage payment (plus upkeep costs of the property) to the rent to make a fair assessment.

I wouldn’t get a five year fixed rate at this stage.

I don't think rates are going to drop again, not to what they have been. Maybe you need to consider what is realistic to buy? Most people get a flat or small house first time round. Can you look at the monthly payments if you extend the mortgage term to 30 or 35 years, depending on your ages? Has reduced our monthly payments a lot.

Prices in lots of areas have come down so that is a bonus, houses in my road flew out at around 800k a few years ago, now they would probably fetch about 670k ish.

Speak to a good broker about what products and costs are realistic for you, then if you want to buy a house (and can), buy one. Waiting for the "right" time could be a long wait, costing you £650 a month in the interim

First time buyers where I am are holding out and not buying, according to our estate agent. We have a fairly expensive first time buyer house and our agent has been saying they just aren't seeing the necessary buyers getting in touch with them at all at the moment.

Houses where I am are taking a long time to sell but do go for around asking price when they do. So our market is stagnant/slow rather than falling in price. It's certainly not showing the 10%+ decrease in prices that a lot of people on here keep claiming is happening. I think people are more likely to just stay put rather than drop their prices much.

I think the rate changes going down will happen, but not by enough that I'd personally find it worth waiting to buy. Same with house prices falling- maybe a little but not much.

As you already know, rates will not be super low again for the foreseeable future. However, they are expected to fall slightly by the end of the year and to carry on falling next year so they should gradually get a bit lower.

In some ways it's a good time to buy as it's considered a Buyers Market which means you will have more power than the seller during negotiations. Prices have fallen slightly since their peak during Covid so you know you aren't buying at the top of the cycle, though you may not be buying at the bottom either. In some ways it's a bad time to buy because the high interest rate is making mortgage rates high and thus unaffordable for many.

There are problems buying whatever the market is like - when it's buoyant people feel pressured to make offers on properties they don't even like that much, before someone else does so are more likely to overpay. This was the situation during the Covid stamp duty holiday - interest rates were low but prices were high so that wasn't ideal either.

There's no easy answer and also no big hurry apart from your pregnancy making you feel you want to be more settled. Were it not for that it might be better to wait a few more months to see if interest rates do fall in the summer and thus benefit from slightly lower mortgage rates. But given you are pregnant, it seems you might be better buying a home now for peace of mind, as long as you don't overpay and as long as you can afford the repayments.

You are in a perfect position to stay put in renting with your low rent.
Keep saving towards a deposit.
I don’t think interest rates are going to come down by much for a good while.
As someone else said first time buyers are holding off.
There has not been the realisation yet by sellers that conditions have changed and they can’t get the prices they want.

I think it really depends where you are. DS and his partner are FTBs and are having no luck. There's not much coming on in their price range and what does flies off the books and they've been outbid a couple of times. They have rented since university and are now just in their 30s so are looking for a 2/3 bed house rather than a flat and it appears that's what everyone else is looking for too.

You also need to think how many people are in a similar position sitting waiting on interest rates to fall, once they do houses will be getting snapped up and prices will rise.

I think you find the right house go for it, but don't buy a house for the sake of buying a house.

DH and I bought our house in September on a 5.39% interest rate (we weren't eligible for lower interest rates due to our background and the timing). Sure, it'd be nicer if we weren't paying the additional 2-3% in interest month on month, but it's the right house for us and we're enjoying owning it.

Interest rates are higher than they've historically been, but in a way that's a nice stress-test for the future - if you're able to pass affordability now and make your payments then you'll definitely be able to when rates come down (fingers crossed!) in 2 years' time and you'll be able to make savings then.

As a PP mentioned, the problem with interest rates coming down is that you'll then be competing against every other first time buyer who's been waiting for the same thing, then you may have to bid higher to win your property and feel more pressure to bid quickly (and risk ending up with a house that's not right for you longterm).

You could get a bargain if you keep a watch on property that has been in the market a while. If you see something you like i’d try a cheeky offer, you never know. Yes you’ll pay slightly higher interest in a two year fix but that will be offset if you get a great deal.

One thing to bear in mind is that it will be harder to get a mortgage of the same size when you have fixed childcare costs.

If you can afford to buy now and find a property you like, I would go for it. I don't think rates are going to come down much for at least a year or so, and in many areas, house prices are starting to creep up regardless.

If you wait too long, could you potentially end up priced out of the market?

There seems to be a general assumption that rates will go down and stay there. They may in the short term, but it seems v likely that they will rise again in the medium to longer term because of multiple inflationary pressures & many other events that are likely to play out over the next few years. If rates fall significantly in the short term, it will be because something terrible has happened eg huge recession, part of financial system breaking, which would result in much higher unemployment and falling wages and therefore further affordability constraints on housing.
If you can get a great deal on a house and all the other factors add up, go for it. In @FlyingSoap's case, however, her rent is cheap and much cheaper than a mortgage so it make much less sense to rush in now because she may be 'nesting'.