Buying a house in the current climate

[seany t]

Her Zoners, wondered what you reckoned to this dilemma.

The girlfriend and I have, after 5 years or so of hard saving, raised our 15% deposit needed to get us on the housing ladder / snake. Our income has been approved too, so we are basically free to go off and buy somewhere around London for under £250,000.

All the banks are saying BUY BUY BUY! The Estate Agents are saying the same.

But, I dunno... I have this gut feeling that things haven't got as bad as they're going to... A few articles I read on the BBC blog back it up.

I know this kind of thing is always a lottery, but it seems ludicrous to me that we are applying for a mortgage at a rate 11 times that of the Bank Of Englands, with earnings at about 3.5 times that of the house's value, and still barely able to get on the ladder.

Are banks just squeezing the last few stragglers / savers dry to fund a capitulating market, that HAS to drop significantly if most earners in the country stand any hope of getting a pad?

I guess London places will hold their value more, and as we're looking in South West London (the more grotty areas like Tooting and Mitcham) and at a 1st floor flat with 1.5 / 2 bedrooms, we shouldn't see the value drop in the 5 year period or so we'd plan to live there I'd imagine. But I just wonder if we're better off renting for that period, putting away £1000+ between us a month (so about £60K potentially) and then moving further out of London (eg. Essex, Zone 4 or Hitchin) where we'd get more for our cash if things don't improve tenfold.

Any thoughts?

 

[DTS]

Property should always be seen as a long term thing - its not a quick win.

The ecconomy is starting to recover, the FTSE 100 is up for six months running, the rate of umemployment is slowing and banks are starting to lend again. All this points for my mind to only one thing and that is increased prices etc.

So what if you buy it and it goes down a bit. I assume you are only buying it for a home for a period of time so waether the storm.

Personally I think the house buying boat left a few months ago but if you hurry to can just catch it before it totally sets sail. My one tip is I would be tempted to fix in rather than track on the mortgage.

All the people that follow what the sun say with track as the BOE is so low and in a years time when the BOE rises they will be moaning. Any fix about the 5-5.50% mark seems good value to me and personally dont pay a massive
arrangement fee. If you and your Mrs have excess income every month either offset it if its going to be a lot (eg take an offset mortgage - wonderful things) or do regular lump sum overpayments to reduce the capital.

If you put your £1000 away a month etc and house prices rise by similar or more then you are losing out. If house prices rise by a reasonable amount next year not only will you pay more for it you may even go over the stamp duty threashold to get the place you want and then all that moved saved is lost anyway. Short term savings pay nothing at the moment anyway and you cant do long term if you plan to move in the near future.

You talk about saving £1000 a month but if the market moves you could make the same as that a month in equity. When I first brought my first flat aged 18 I paid £53k - A year later it was £75k and nows its about £130k - It was valued at £160k at its peak. All paper money obviously but when you come to sell you can add that equity to your new deposit.

As for where to buy only you can decide that my friend.

Hope this helps mate.

 

[Yorkshire Blue]

Get central heating and you should be fine.

 

[The Flying Scotsman]

All the people that follow what the sun say with track as the BOE is so low and in a years time when the BOE rises they will be moaning. Any fix about the 5-5.50% mark seems good value to me and personally dont pay a massive arrangement fee.

I'm generally in favour of fixing, however I don't believe that interest rates are going to rise that much in the next couple of years, if at all, so I plan on holding out before fixing.

I'm just coming off a 5 year fixed at around 5.5% (i think), and will be reverting to the Nationwides BMR of 2.5% next month. This compares with their current 3.5% SMR, so given the extra savings (or rather keep my current payment and reduce the capital quicker) I'm going to stick and see what unfolds.

 

[Usual_Suspect]

What I can't uderstand is why the average fixed rate is about 4.5 - 6% when the base rate is 0.5%. I got a better fixed rate then that five years ago when the base rate was about 3.5% ish.

 

[Pubey]

I know nothing about property really, but there is still major uncertainty in the economy at the moment. We have huge public sector cuts to come, a government reshuffle... prices might have plateaued for now but there is little sign of of them rising, it just appears that there is low supply at the moment and people are looking to get on the property train. I don't think I'm the only one thinking that we're in the middle of a 'W'. A rise in supply as unemployment remains high might see another dip, and as you've said it's difficult to get credit at the moment which is stifling demand.

 

[Usual_Suspect]

I'm generally in favour of fixing, however I don't believe that interest rates are going to rise that much in the next couple of years, if at all, so I plan on holding out before fixing.

I'm just coming off a 5 year fixed at around 5.5% (i think), and will be reverting to the Nationwides BMR of 2.5% next month. This compares with their current 3.5% SMR, so given the extra savings (or rather keep my current payment and reduce the capital quicker) I'm going to stick and see what unfolds.

All about the Nationwide 2.5%! Ours ended a few months ago and it's time to go overpayment crazy.

The Times (and BBC) said the rate could stay at 0.5% until 2011 and may not raise to 2% until 2014 at the earliest.

 

[DTS]

What I can't uderstand is why the average fixed rate is about 4.5 - 6% when the base rate is 0.5%. I got a better fixed rate then that five years ago when the base rate was about 3.5% ish.

The Bank of England rate is largely irrelvant to the lenders. They are more interested in Swop rates which are the rates they can actually get the money for. Swop rates are high and as a result the cost of lending (Assuming you can convince yourself there not all money grabbing *******s milking us all) is high too.

 

[DTS]

I'm generally in favour of fixing, however I don't believe that interest rates are going to rise that much in the next couple of years, if at all, so I plan on holding out before fixing.

I'm just coming off a 5 year fixed at around 5.5% (i think), and will be reverting to the Nationwides BMR of 2.5% next month. This compares with their current 3.5% SMR, so given the extra savings (or rather keep my current payment and reduce the capital quicker) I'm going to stick and see what unfolds.

Depends on your lender I think.

Abbey for examples standard rate is 4.24% and I have two mortgages with them so if they could offer me any sort of decent fix I would snap it up.

C&G for example who I have one with is something stupid like 2.5% so I dont mind having a variable with them as the BOE needs to creep up a fiar bit before I am worse off.

I am guessing in Seany case at 85% rates are poor as its not really that attractive to the lenders at that rate so based upon that and the fact its a first time purchase would make me say fix.

I do take your point though.

 

[blues_r_best]

Saved up 15% deposit with my missus and got on a 4 year fixed deal with Abbey at 5.89%. Bought a three bed semi in Southend for £135500, easily worth probably ten grand more than that and we complete on Monday.

Good times.

 

[seany t]

Cheers folks.

Yeah, the best we could get was Abbey at 5.89%. Which is a little ridiculous, as my mate got a better rate than that at a 100% mortgage and with higher BOE rates 3 years ago!

This is the third article I've read now that's said the same thing - basically that people can't afford houses anymore, and that they simply HAVE to fall:
http://www.guardian.co.uk/money/blog/2009/aug/27/house-prices-rise-fall

If the lady and myself were thinking of having kids there, settling down etc then I'd grab the opportunity. But we're thinking we might move further afield in 4-5 years time to do that.

I dunno... this is a lot harder than working out who is better out of QT and Spielberg...

 

[The Flying Scotsman]

Saved up 15% deposit with my missus and got on a 4 year fixed deal with Abbey at 5.89%. Bought a three bed semi in Southend for £135500, easily worth probably ten grand more than that and we complete on Monday.

Good times.

Nice one Toddy! Good to hear.

 

[steveo]

There was an article in the Telegraph financial pages last week expecting house prices to fall by up to another 13% before they start a solid rise again.

I usually look and see what's around and have noticed quite a few coming on the market at really low prices if a quick deal can be done. These are the repo's the Banks are trying to get shot of.

If you are not in a massive hurry, I would wait a while on the basis that A) the Telegraph article may have some truth in it, and B) there will be more and more repo's coming on in the near future as the banks scramble to get some return.

Patience could be the key, but, I bought a house in 1990 when I thought it was the bottom of the market, for 100,000. 6 months later it was worth about 90. So probably best to do the opposite of what I think then.

 

[Ulysses]

Its a good time to get a bargain. Think long term as well. If you know your maximum is £1200 repayment a month then go £900 (estimate of course) never overspend when low. I've been on ladder since 1996 and i've seen mates f*up, lucky i've done alright.

Base rate will stay at same level until next September but will you benefit from that long term NO! I predict 2% by this time in 2011 and the banks will return to there goal of the 363 rule by 2012 (thats 3% for savers, 6% for borrowers and on the golf course by 3pm).

BTW - Bought 3 bed house in Hampshire for £60k in 1996 sold 2001 £124k, bought 3 bed house in 2003 for £156k sold for £175k in July this year. Bought 4 bed for £230k!!!