Buying a house: collective wisdom required

ToneControl

AFAIK there is over-supply at present.
Also I'd expect longer-term fixed rate mortgages to get cheaper.
What mortgage deal have they got?

When we bought our first house, the interest rates had gone up past 10 per cent.
It had taken 2-3 years for sellers to capitulate, then the price drops came and bottomed out. The prices then stayed pretty static for 7-8 years.
If we'd been buying 2 years sooner, we would not have known they would come down, and would have bought a smaller house I guess. In the end it would be OK anyway.

I don't think the election will make any difference. Insurance rate cuts may start more buying.
Can they move quickly? Best to get mortgage in principle arranged in advance then shop around.

What town is it in btw?

CavemanGrogg

ToneControl said:

AFAIK there is over-supply at present.
Also I'd expect longer-term fixed rate mortgages to get cheaper.
What mortgage deal have they got?

When we bought our first house, the interest rates had gone up past 10 per cent.
It had taken 2-3 years for sellers to capitulate, then the price drops came and bottomed out. The prices then stayed pretty static for 7-8 years.
If we'd been buying 2 years sooner, we would not have known they would come down, and would have bought a smaller house I guess. In the end it would be OK anyway.

I don't think the election will make any difference. Insurance rate cuts may start more buying.
Can they move quickly? Best to get mortgage in principle arranged in advance then shop around.

What town is it in btw?

From what I've seen, not that I've been studying mortgages lately, is that they are down from last year, despite the BoE not cutting interest rates.

ToneControl

CavemanGrogg said:

ToneControl said:

AFAIK there is over-supply at present.
Also I'd expect longer-term fixed rate mortgages to get cheaper.
What mortgage deal have they got?

When we bought our first house, the interest rates had gone up past 10 per cent.
It had taken 2-3 years for sellers to capitulate, then the price drops came and bottomed out. The prices then stayed pretty static for 7-8 years.
If we'd been buying 2 years sooner, we would not have known they would come down, and would have bought a smaller house I guess. In the end it would be OK anyway.

I don't think the election will make any difference. Insurance rate cuts may start more buying.
Can they move quickly? Best to get mortgage in principle arranged in advance then shop around.

What town is it in btw?

From what I've seen, not that I've been studying mortgages lately, is that they are down from last year, despite the BoE not cutting interest rates.

yes, the longer term rates are lower now, based on market expectations, of which BoE rates are only one factor.
At the minute, 5 year rates are cheaper than 2 year, but all are far from when base rates were around zero.
We'd hope they would go low again, but who knows, maybe the last few years of ultra-low interest was just a blip

p90fool

When you're renting, every month you delay buying is another month where you're paying somebody else's mortgage. 

TheBigDipper

p90fool said:

When you're renting, every month you delay buying is another month where you're paying somebody else's mortgage. 

This^^^^

I subscribe to the idea that a house is just a machine for living in.

It has meant I've stayed in places for a long time. I've only lived in 3 flats and then 2 houses in my entire adult life. If you look at house prices, then of course I could be better off financially if I'd moved frequently and chased higher-value properties, but that's one of the behaviours that has helped the country get to this point in the first place - inflated property values based on scarcity and the ability to price other people out. Not the only thing by any means, but a contributor. 

Better (IMHO) to buy a place you can live your life from, not in. 

But today, buy something if you can, rather than pay rent whilst waiting. 

Sporky

Also worth noting that people are less willing to sell during a crash. 

ToneControl

p90fool said:

When you're renting, every month you delay buying is another month where you're paying somebody else's mortgage. 

it's a fair point, but to give the best advice we'd need to know more about the buyer:
Are they living with their parents? salary likely to go up? what areas are needed to be commutable,  budget and mortgage.

I have recently found out when looking for info for retired friends who are downsizing, that shared ownership houses or apartments can be really good value:

e.g. in my town decent 2 bed terraced houses start around £130k.
However, you can find shared ownership scheme houses and apartments.
I had a look, and it's quite interesting: Say £25k to own 25% of a 2 bed flat, then pay rent.
With the ones I have looked at, the rent is effectively the service charge for the block plus the loan interest on the 75%.
For some flats, the effective interest was 5%+. others were only 2%-3%.
I assume that some schemes locked in good rates before Liz Truss got involved.

stickyfiddle

WezV said:

Let's say there is a crash soon.   Based on the last 2 it will take 8-10 years for the average price to get back to what it was, but it will recover a big chunk of that value within a couple of years.   They will also be building equity back from the mortgage payments paid in that time.

So worse case is likely a couple of years of negative equity, and that's only an problem if looking to sell or remortgage.

Buying a property is rarely a gamble.  The gamble is how long to fix that mortgage for.

This. 

No reason to assume prices will drop significantly in the next couple of years, and if anything when rates drop they'll probably shoot up even further. Standard advice not to absolutely max your budgets applies (as always) because you never know when life might get in the way and leave you not able to make mortgage payments, 

Mortgage rates on the other hand are shaky. I wouldn't want a long fix at the moment, though I'm not up to speed on latest rates in the UK. 

TimmyO

“The best time to buy a house is always 5 years ago” 

I have a friend who owns a regional estate agents - nothing I’ve heard from
him sounds like we’re in such a price bubble that it’s a fundamentally un-sound time to buy, but there might be local variations near you that are worth knowing.

e.g. I asked one of his guys who specialises in investments and new-ish properties (on behalf of a friend) what was worth leaning toward or away from from an investment point of view locally - he had specific advice that a couple of certain types of properties in one half of the area that always sold ridiculously fast and also advised strongly to avoid anything leasehold - lots of stories of people being stuck unable to sell as buyers were facing hurdles getting mortgages for various reasons to do with where the legislation is at. 

My friend is a staunch supporter of <particular party> and even he says that you can’t say that if either major party wins how much and in which direction prices and demand will go. 

Rob1742

Although I would certainly buy as it’s important to get on the housing ladder, there is some real movement happening at the higher end of the market and it’s been happening since the interest rate rises.

I check high end properties in certain Cities on a regular basis and the availability since the rate rises is very high, alarmingly high. 

Cities like Newcastle and Norwich have an abundance of high priced ( £1m plus) properties on the market these days and this certainly was not the case prior to the rate jump.

In addition there is a huge amount of properties on the market now in seaside towns which again is a new situation. 

Some of these seaside town properties will be from people who purchased on impulse during covid for holidaying, but  the amount of properties available is massively increased on those that appeared to have been sold during the covid years and so it appears a large number of people are selling their second homes.

I was discussing holiday home sales today with someone on a holiday park and they said the below £50k purchases are strong, anything above that is now just sticking with little to no movement. 

So it is certainly hitting those with big mortgages or second homes with mortgages.

This though has been happening for a while and although I thought it would trickle down it appears it hasn’t and it’s only at the higher end where real difficulties are. 

But like I say I’d still buy as it’s best to have paid a years mortgage than a years rent. You would be unlucky if it declined in the very year you purchased but over the years you’d get it back and more by the time you have paid the mortgage off

WezV

Here you go, Saville predict a 20% increase over the next 5 years and they have revised 2024 prediction from -3% to +2.5%

https://www.savills.co.uk/research_articles/229130/359399-0

boogieman

Rob1742 said:

Although I would certainly buy as it’s important to get on the housing ladder, there is some real movement happening at the higher end of the market and it’s been happening since the interest rate rises.

I check high end properties in certain Cities on a regular basis and the availability since the rate rises is very high, alarmingly high. 

Cities like Newcastle and Norwich have an abundance of high priced ( £1m plus) properties on the market these days and this certainly was not the case prior to the rate jump.

In addition there is a huge amount of properties on the market now in seaside towns which again is a new situation. 

Some of these seaside town properties will be from people who purchased on impulse during covid for holidaying, but  the amount of properties available is massively increased on those that appeared to have been sold during the covid years and so it appears a large number of people are selling their second homes.

I was discussing holiday home sales today with someone on a holiday park and they said the below £50k purchases are strong, anything above that is now just sticking with little to no movement. 

So it is certainly hitting those with big mortgages or second homes with mortgages.

This though has been happening for a while and although I thought it would trickle down it appears it hasn’t and it’s only at the higher end where real difficulties are. 

But like I say I’d still buy as it’s best to have paid a years mortgage than a years rent. You would be unlucky if it declined in the very year you purchased but over the years you’d get it back and more by the time you have paid the mortgage off

I’m sure I read something recently about second homes being subject to full or 10% discounted council tax now, whereas previously there could be a much larger discount applied. All done at the discretion of the local council, so it’ll vary by region, but that might explain the larger numbers of seaside homes on sale?  

allen

WezV said:

Here you go, Saville predict a 20% increase over the next 5 years and they have revised 2024 prediction from -3% to +2.5%

https://www.savills.co.uk/research_articles/229130/359399-0

Shock as company that makes money from increasing the price of houses predicts increase in the price of houses.

allen

Okay, I'll spend a few minutes spouting my slightly contrarian view on all of this. 

Firstly, I have come to believe that a house is a place to live and not a financial investment. There is a cultural obsession with investing in property in the UK and I used to accept it as 'normal', but it is not necessarily so. For every person down the pub who regales you with tales of how much they made there may well be plenty of others who lost money (or worse, have no idea if they did or not) and don't say anything. There is a bias in the way that this is talked about by others. There are also plenty of people who think like Trigger and his broom and choose to gloss over or forget all of the costs and hardships that they went through to make that money.

My point is that a house purchase has advantages and disadvantages, but there is a tendency to think that there is only one answer - which is always to buy.

Here are a few numbers that might begin to show the issues highlighted in this thread. Bear with me as this might be a bit long.

First off, assume a house price of £500k. To arrange the mortgage you have to pay £1k (by the way, that will be 'paying the lender's mortgage' - saying that you are paying someone else's mortgage is not a sensible way of looking at things, every time you hand over cash for anything you are paying someone else's mortgage)

Let's also assume a 40 year term and a loan to value of 85% as set out below.

House price	£500,000
LTV	85.00%
Mortgage rate	4.57%
Lenders fee	£999
Loan amount	£425,999
Term	40
Having done all of that this is roughly what you are paying in interest. Note that in this calculation you only pay off £4k of the principle in a year. An earlier poster says that you at  least gain the equity of the repayment, but assuming you  have saved the deposit then you could save more than  this in a year.
Mortgage
Annual mortgage repayment	£23,382
Annual interest	£19,468
Annual principle repayment	£3,914
Monthly repayments	£1,948
Upfront payments
Mortgage deposit	£75,000
Stamp Duty (just money down the drain)	£12,500
Conveyancing and searches	£3,000
Survey	£820
Total upfront payments	£91,320
So with all that done, on the day you move in, you have a huge debt which carries huge risk (what if you lose your job? or the house is flooded etc.etc. there are 101 things that can go wrong) and now, even assuming that you could sell it for the  same price you got it for the next day, you would lose almost £20k.
Expected profit/loss
Time horizon	5 years
Assumed sale price	£550,000
Interest paid	£97,341
Current rent	£2,500
Rent inflation	3%
Rent you would have paid	£159,274
Initial costs	-£17,319
Regular maintenance/improvements	-£50,000
Repayments - interest and service charge	-£97,341
Appreciation	£50,000
Net profit (-loss)	-£114,660
Versus rent	£44,614

In this model I have put an alternative rental cost and to be fair this model shows that you are almost £50k ahead of renting over 5 years, but it also shows that this person actually lost money on the house purchase deal. 

Things not modelled:
- Costs of selling house i.e. agents and solicitors fees (say £5k)
- The risk of house ownership (boundary disputes, nasty neighbours, neighbour erects ugly building, etc.)
- Risks of physical property (flood, fire, wear and tear, etc. etc.)
- Costs of insurance
- Staying awake at night worrying about your job/redundancy etc.
- What you did with the spare £85k (made an investment with a good return)
- Huge cost of moving if you have to move for family/kids' schools/job
- Not being able to leave with a month's notice and take up short term opportunities (both leisure and career related)


Of course these numbers are debatable - nobody can predict the future.

However, I think people should understand that buying property is not the 'no-brainer' that everybody makes it out to be.

WezV

allen said:

WezV said:

Here you go, Saville predict a 20% increase over the next 5 years and they have revised 2024 prediction from -3% to +2.5%

https://www.savills.co.uk/research_articles/229130/359399-0

Shock as company that makes money from increasing the price of houses predicts increase in the price of houses.

Indeed, but the point is that they didn't predict an increase 6 months ago... now they do

ToneControl

boogieman said:

Rob1742 said:

Although I would certainly buy as it’s important to get on the housing ladder, there is some real movement happening at the higher end of the market and it’s been happening since the interest rate rises.

I check high end properties in certain Cities on a regular basis and the availability since the rate rises is very high, alarmingly high. 

Cities like Newcastle and Norwich have an abundance of high priced ( £1m plus) properties on the market these days and this certainly was not the case prior to the rate jump.

In addition there is a huge amount of properties on the market now in seaside towns which again is a new situation. 

Some of these seaside town properties will be from people who purchased on impulse during covid for holidaying, but  the amount of properties available is massively increased on those that appeared to have been sold during the covid years and so it appears a large number of people are selling their second homes.

I was discussing holiday home sales today with someone on a holiday park and they said the below £50k purchases are strong, anything above that is now just sticking with little to no movement. 

So it is certainly hitting those with big mortgages or second homes with mortgages.

This though has been happening for a while and although I thought it would trickle down it appears it hasn’t and it’s only at the higher end where real difficulties are. 

But like I say I’d still buy as it’s best to have paid a years mortgage than a years rent. You would be unlucky if it declined in the very year you purchased but over the years you’d get it back and more by the time you have paid the mortgage off

I’m sure I read something recently about second homes being subject to full or 10% discounted council tax now, whereas previously there could be a much larger discount applied. All done at the discretion of the local council, so it’ll vary by region, but that might explain the larger numbers of seaside homes on sale?  

AFAIK, many holiday areas charge 200% or even now 300% of the normal council tax on a 2nd home. BTLs in cities are usually charged at 100% of council tax when empty

ToneControl

allen said:

Okay, I'll spend a few minutes spouting my slightly contrarian view on all of this. 

Firstly, I have come to believe that a house is a place to live and not a financial investment. There is a cultural obsession with investing in property in the UK and I used to accept it as 'normal', but it is not necessarily so. For every person down the pub who regales you with tales of how much they made there may well be plenty of others who lost money (or worse, have no idea if they did or not) and don't say anything. There is a bias in the way that this is talked about by others. There are also plenty of people who think like Trigger and his broom and choose to gloss over or forget all of the costs and hardships that they went through to make that money.

My point is that a house purchase has advantages and disadvantages, but there is a tendency to think that there is only one answer - which is always to buy.

Here are a few numbers that might begin to show the issues highlighted in this thread. Bear with me as this might be a bit long.

First off, assume a house price of £500k. To arrange the mortgage you have to pay £1k (by the way, that will be 'paying the lender's mortgage' - saying that you are paying someone else's mortgage is not a sensible way of looking at things, every time you hand over cash for anything you are paying someone else's mortgage)

Let's also assume a 40 year term and a loan to value of 85% as set out below.

House price	£500,000
LTV	85.00%
Mortgage rate	4.57%
Lenders fee	£999
Loan amount	£425,999
Term	40
Having done all of that this is roughly what you are paying in interest. Note that in this calculation you only pay off £4k of the principle in a year. An earlier poster says that you at  least gain the equity of the repayment, but assuming you  have saved the deposit then you could save more than  this in a year.
Mortgage
Annual mortgage repayment	£23,382
Annual interest	£19,468
Annual principle repayment	£3,914
Monthly repayments	£1,948
Upfront payments
Mortgage deposit	£75,000
Stamp Duty (just money down the drain)	£12,500
Conveyancing and searches	£3,000
Survey	£820
Total upfront payments	£91,320
So with all that done, on the day you move in, you have a huge debt which carries huge risk (what if you lose your job? or the house is flooded etc.etc. there are 101 things that can go wrong) and now, even assuming that you could sell it for the  same price you got it for the next day, you would lose almost £20k.
Expected profit/loss
Time horizon	5 years
Assumed sale price	£550,000
Interest paid	£97,341
Current rent	£2,500
Rent inflation	3%
Rent you would have paid	£159,274
Initial costs	-£17,319
Regular maintenance/improvements	-£50,000
Repayments - interest and service charge	-£97,341
Appreciation	£50,000
Net profit (-loss)	-£114,660
Versus rent	£44,614

In this model I have put an alternative rental cost and to be fair this model shows that you are almost £50k ahead of renting over 5 years, but it also shows that this person actually lost money on the house purchase deal. 

Things not modelled:
- Costs of selling house i.e. agents and solicitors fees (say £5k)
- The risk of house ownership (boundary disputes, nasty neighbours, neighbour erects ugly building, etc.)
- Risks of physical property (flood, fire, wear and tear, etc. etc.)
- Costs of insurance
- Staying awake at night worrying about your job/redundancy etc.
- What you did with the spare £85k (made an investment with a good return)
- Huge cost of moving if you have to move for family/kids' schools/job
- Not being able to leave with a month's notice and take up short term opportunities (both leisure and career related)


Of course these numbers are debatable - nobody can predict the future.

However, I think people should understand that buying property is not the 'no-brainer' that everybody makes it out to be.

also redemption penalties can be massive

Another scenario to consider is retirement, if your estate is worth a lot:
How about selling up and giving the cash to the kids, and then renting, hoping on living 7 years+

CavemanGrogg

ToneControl said:

boogieman said:

Rob1742 said:

Although I would certainly buy as it’s important to get on the housing ladder, there is some real movement happening at the higher end of the market and it’s been happening since the interest rate rises.

I check high end properties in certain Cities on a regular basis and the availability since the rate rises is very high, alarmingly high. 

Cities like Newcastle and Norwich have an abundance of high priced ( £1m plus) properties on the market these days and this certainly was not the case prior to the rate jump.

In addition there is a huge amount of properties on the market now in seaside towns which again is a new situation. 

Some of these seaside town properties will be from people who purchased on impulse during covid for holidaying, but  the amount of properties available is massively increased on those that appeared to have been sold during the covid years and so it appears a large number of people are selling their second homes.

I was discussing holiday home sales today with someone on a holiday park and they said the below £50k purchases are strong, anything above that is now just sticking with little to no movement. 

So it is certainly hitting those with big mortgages or second homes with mortgages.

This though has been happening for a while and although I thought it would trickle down it appears it hasn’t and it’s only at the higher end where real difficulties are. 

But like I say I’d still buy as it’s best to have paid a years mortgage than a years rent. You would be unlucky if it declined in the very year you purchased but over the years you’d get it back and more by the time you have paid the mortgage off

I’m sure I read something recently about second homes being subject to full or 10% discounted council tax now, whereas previously there could be a much larger discount applied. All done at the discretion of the local council, so it’ll vary by region, but that might explain the larger numbers of seaside homes on sale?  

AFAIK, many holiday areas charge 200% or even now 300% of the normal council tax on a 2nd home. BTLs in cities are usually charged at 100% of council tax when empty

Not just holiday areas, now a lot of areas with shortages of housing are doing it.

BluesLover

My house is now paid for, so in my retirement I've got somewhere to live that's mine. I'd rather be in this situation than continuing to pay rent indefinitely.
I wouldn't want to buy leasehold.

rlw

If you buy wisely, you will have a home and a worthwhile asset.  No-one can just chuck you out so you have security, and you can paint it any colour you like.

As Blueslover has said, above, you will pay rent indefintely and you will need a pension + benefits to carry on with that when you retire.

And who knows, you might even make some money on it in the future.