Is it a really bad idea to buy a house right now?

[HungryHippos]

This is certainly one of my worries as a FTB. We're going with a 2 year fix with overpayments, so the house would need to be worth circa 16% less than what we bought it for to end up in negative equity. I have absolutely no idea if that's realistic or not, as I don't have a crystal ball, nor am I an economist, but that seems like a catastrophic drop in value over a 2 year period. Reading something like that makes me feel anxious about buying now.

HSBC provided an example of what the monthly mortgage payment would be after moving onto the SVR at today's rate and it increased by approximately £100. We could afford that. We could even afford it if the payment increased by £500.

Don't be terribly put off by my words, I just highlighted a potential scenario because a lot of people seem ignorant of that possibility.

In your case the SVR seems manageable so you should never wind up in serious trouble, although job security and ability to pay the mortgage is a factor that we all contend with.

SVR rates are more of a problem with very large mortgage balances, I can only surmise that with a £100 increase your mortgage isn't massive.

 

[Robi]

Unless you expect it to lose the equivalent of rent less interest over a sustained period I can't see the issue, provided your income is stable.

The mortgage payment for our 2 year fix is identical to what we currently pay in rent. The intention was to overpay and cross into the 85% LTV threshold so we can remortgage at a better rate, but that's obviously subject to the value of the house. If the house lost the same value as rent less interest every month for 24 months, it would reduce the value by £21,602 / 7.88%.

The house would need to lose circa £42,139 for us to end up in negative equity (excluding overpayments). We're moving to an area with the 5th highest YoY % change for Manchester in 2019 - around 3.47%. It's already a lovely area with fantastic schools, connections, amenities etc, not a cesspit undergoing massive redevelopment.

We're 4-6 weeks away from exchanging, so we still have plenty of time to either pull out or press on.

 

[The_Arbiter]

Is the property of a design and size, onsuite bathroom and additional parking for example? Where renting out a room for cheap short term could make up the difference of unaffordable cost increases?

I think it may have been mentioned in here before though. It's a nice backup plan as opposed to the worst case scenario if poo hit the fan, which tbf you already show you're financially prepared for

 

[Robi]

Is the property of a design and size, onsuite bathroom and additional parking for example? Where renting out a room for cheap short term could make up the difference of unaffordable cost increases?

I think it may have been mentioned in here before though. It's a nice backup plan as opposed to the worst case scenario if poo hit the fan, which tbf you already show you're financially prepared for

3 bedrooms with a single 4 piece bathroom. Driveway has sufficient room for 2 cars. The master is a decent sized double bedroom but the other two are more like singles.

 

[happy_2008]

Imagine lockdown whilst renting a room

 

[Kaka]

Buy a house to live in. You can then sleep easier at night, not having to worry about how much it will lose over a certain period. A bold and simplistic view on things but there you go.

 

[manic111]

I've not read the full thread, but am in a similar position. I'm looking to buy (first time buyer) in London for circa £400k, with roughly a 20% deposit. The stamp duty holiday is currently saving me 5-6k, so that's a positive reason for buying now, and realistically if I buy anywhere I expect to be in it for at least 5 years (and if anything in my life happens to make me move sooner, in all likelihood I'll rent it out rather than selling).

My feeling is that talk of a 15-20% decline is overblown, and even if that does happen I'd expect it to bounce back to at least some extent within 5-10 years, so the question is whether the stamp duty saving offsets the risk of a crash. I think that it doesn't quite do so, but together with the intangibles (owning not renting, living somewhere I like, etc) I feel that on balance buying now probably just about makes sense for me. But it's a close run thing and I've definitely got some concerns. If I end up not buying something until early next year to get a sense of what the market is doing I won't be unhappy.

 

[The_Arbiter]

3 bedrooms with a single 4 piece bathroom. Driveway has sufficient room for 2 cars. The master is a decent sized double bedroom but the other two are more like singles.

Didn't have to give a breakdown Was asking based on whether renting a room out short term was viable, should things go wrong. But with a family obviously not ideal, but that's only a decision you could make For me, renting out would offset the pain of being forced to move at significant loss, in reference to negative equity.

I've not read the full thread, but am in a similar position. I'm looking to buy (first time buyer) in London for circa £400k, with roughly a 20% deposit. The stamp duty holiday is currently saving me 5-6k, so that's a positive reason for buying now, and realistically if I buy anywhere I expect to be in it for at least 5 years (and if anything in my life happens to make me move sooner, in all likelihood I'll rent it out rather than selling).

My feeling is that talk of a 15-20% decline is overblown, and even if that does happen I'd expect it to bounce back to at least some extent within 5-10 years, so the question is whether the stamp duty saving offsets the risk of a crash. I think that it doesn't quite do so, but together with the intangibles (owning not renting, living somewhere I like, etc) I feel that on balance buying now probably just about makes sense for me. But it's a close run thing and I've definitely got some concerns. If I end up not buying something until early next year to get a sense of what the market is doing I won't be unhappy.

London is a different beast. You should make a new thread. But in regards to being in a similar position, best to include if you have a sprog/s, job security/prospects/availability of role/etc. You won't pay any stamp duty on a first time buy till April next year, even if you weren't a FTB you wouldn't pay anything for a £400k property. After April 2021 a second home purchase would cost £6250 for £400k. If a FTB it would cost £5k. https://www.gov.uk/stamp-duty-land-tax/residential-property-rates

I know nothing about London, but it has been brought up a few times here and elsewhere that due to working from home, lockdowns showing gardens are wonderful things, and built up areas are not so great for the virus, London could see a higher depreciation of value compared to rural areas. However Boris' friends probably own properties in London, so also take that with an equal pinch of salt. But this should raise an eyebrow when you start talking about renting out instead of selling.

I just feel a bit iffy in regards to you having mentioning £5k being a factor when you've got £80k deposit, moving within 5yrs, then buying a second property. But you also mention not being unhappy if you don't buy now as wanting to see what happens, i guess you aren't renting in London? I'm never going to earn as much as you, so giving my opinion in regards to your situation would be very wonky, for lack of a better word.

 

[manic111]

London is a different beast. You should make a new thread. But in regards to being in a similar position, best to include if you have a sprog/s, job security/prospects/availability of role/etc. You won't pay any stamp duty on a first time buy till April next year, even if you weren't a FTB you wouldn't pay anything for a £400k property. After April 2021 a second home purchase would cost £6250 for £400k. If a FTB it would cost £5k. https://www.gov.uk/stamp-duty-land-tax/residential-property-rates

I know nothing about London, but it has been brought up a few times here and elsewhere that due to working from home, lockdowns showing gardens are wonderful things, and built up areas are not so great for the virus, London could see a higher depreciation of value compared to rural areas. However Boris' friends probably own properties in London, so also take that with an equal pinch of salt. But this should raise an eyebrow when you start talking about renting out instead of selling.

I just feel a bit iffy in regards to you having mentioning £5k being a factor when you've got £80k deposit, moving within 5yrs, then buying a second property. But you also mention not being unhappy if you don't buy now as wanting to see what happens, i guess you aren't renting in London? I'm never going to earn as much as you, so giving my opinion in regards to your situation would be very wonky, for lack of a better word.

Thanks for the reply and advice.

I'm actually in a bit of a weird position - broke up with my partner and moved out a couple of months ago. I'm really fortunate in that my family has a flat I'm able to live in temporarily, but I hate living off them so realistically if I'm not buying this year I'm going to look to rent again.

I'm looking at buying a property with a garden so hope to be buffered to an extent from people's desires to get outside more, but I agree that that's a concern. I also understand that it's the London commuter belt that's taking a real hit at the moment as people living there are moving further out, whereas central is holding up.

As for my situation -single, no sprogs, decent job security and am relatively underpaid for the work I do, which is quite specialist (so it's unlikely, unless the worst happened and I was made redundant which is unlikely, that I'll ever earn less than I do now).

It's not so much that I'm concerned about the potential for paying 5k in SDLT, more that not paying it and buying sooner is one way to offset the risk. I agree that in an ideal world I'd not buy until early next year.

 

[kissenger]

We've decided to put an offer in on the house. What's a sensible offer on a property listed at OIRO £225k?

My thinking is to go in at £215k. I think if the seller sticks with £225k we'll just wait to see what happens in the market.

 

[SpeedFreak]

It depends. Cash offer or first time buyer I might settle at £210k, if you have to sell to buy I may be less inclined to accept less than £215k.

 

[manic111]

It depends. Cash offer or first time buyer I might settle at £210k, if you have to sell to buy I may be less inclined to accept less than £215k.

Out of interest, and I appreciate that there are a LOT of variables, does that mean that as an FTB it wouldn't be unreasonable to bid 400 for a place on at 425?

 

[SpeedFreak]

Out of interest, and I appreciate that there are a LOT of variables, does that mean that as an FTB it wouldn't be unreasonable to bid 400 for a place on at 425?

Being immediately able to proceed has value. You are a better quality bidder than someone in a chain and can leverage that to your advantage.

 

[fobose]

It depends how many similar properties are being sold at the time too. If there are not many, then you might lose out. If there are a lot on the market then you could put in a lower offer.

 

[manic111]

Being immediately able to proceed has value. You are a better quality bidder than someone in a chain and can leverage that to your advantage.

Thanks. I get the logic. I was more asking what a reasonable reduction from the asking would be. As said, I understand that there are loads of variables, but if I go in at 400 an I going to look a complete buffoon, or is it a reasonable position at which to start a negotiation?

 

[SpeedFreak]

Thanks. I get the logic. I was more asking what a reasonable reduction from the asking would be. As said, I understand that there are loads of variables, but if I go in at 400 an I going to look a complete buffoon, or is it a reasonable position at which to start a negotiation?

Honestly hard to say, depends on the house, area, local market and buyer. Just remember, the worst they can say is no.

 

[manic111]

Honestly hard to say, depends on the house, area, local market and buyer. Just remember, the worst they can say is no.

Fair point - thanks!

 

[kissenger]

FWIW, I met the seller at the house today and it's obvious she wants to move quickly. She even told us she has a property lined up she wants to buy, but has a deadline of 8 October to formally agree. We're FTBs and we've got our mortgage and deposit ready to go, so hopefully we can get it at a good price as 'good buyers' so to speak.

 

[Ahleckz]

We've decided to put an offer in on the house. What's a sensible offer on a property listed at OIRO £225k?

My thinking is to go in at £215k. I think if the seller sticks with £225k we'll just wait to see what happens in the market.

I’ve mentioned it a few times. We offered £255 on offers over £215k. We were 6th best offer.
We then offered £262 on offers over £209. We were 5th best offer and it went for over £300k. My advice? Figure out what you can afford, what you’re happy to pay and offer that. As we say up here “go balls out”.

It’s a sellers market, there’s no chance to negotiate.

 

[kissenger]

I’ve mentioned it a few times. We offered £255 on offers over £215k. We were 6th best offer.
We then offered £262 on offers over £209. We were 5th best offer and it went for over £300k. My advice? Figure out what you can afford, what you’re happy to pay and offer that. As we say up here “go balls out”.

It’s a sellers market, there’s no chance to negotiate.

You might be right. We'll see. It could also vary a lot based on which part of the country you're in as well though.