Is this the right or wrong time to buy a house?

[Patrick1346 10]

That might have applied a few years ago, but i have grave reservations about any capital gains over 6 months, particularly with inflation looking ready go soar (and all that goes with it).

 

Although if you can come up with a cohesive argument to convince me otherwise, I'd love to hear it. Im yet to have anyone explain to me how HPI can keep growing, and outsripping wage inflation at such a spectacular rate, without the spectre of a correction making an appearance (other than the unqualified 'house prices only ever go up' nonsense).

 

Would be interested to know if you own your own property or if your circumstances are different. Do you live with your parents, or do you rent?

[jimmy 10]

It's no time to hang around if you are a FTB.

 

Depends what you are buying. According to the land registry flat prices fell 2% in the last quarter in Sheffield although terraces did increase by 5.4% this was before the last IR rises.

 

Money is still incredibly cheap to borrow and even another half point should make little impact to the overall market.

 

Yes money is still cheap to borrow but inflation is out of the proverbial tube of toothpaste and it won't be easy to get it back in. I predict IR at 6% at least by the end of the year, all those people who come off their fixed rate mortgages will be suffering. Historic lows reverting to the historical norm (6-7%) will mean people's mortgages increasing by 20-30%.

 

Of course we can argue forever about this. I don't understand why people think it's good that house prices are 3 times what they were 10 years ago. For themselves, their kids or the economy in general?

 

Tony you say house prices have never crashed? Do you remember the late 80's early 90's?

 

http://en.wikipedia.org/wiki/Housing_bubble

 

There appears to be a bit of a bubble followed by a "crash" then. Tens of thousand of houses were repossessed. Sheffield didn't bear the brunt of the last crash as the economy was fragile and house prices were low compared to incomes, not this time.

 

We are in new territory, the bubble has happened across the world due to the cheap money (the Bank of England increased our money supply by 14% last year), rising inflation, the carry trade (once the Bank of Japan increase their interest rates from 0%) and other socio-economic factors that are far too detailed to go into here.

[aussieboy 10]

Depends what you are buying. According to the land registry flat prices fell 2% in the last quarter in Sheffield although terraces did increase by 5.4% this was before the last IR rises.

 

Yes money is still cheap to borrow but inflation is out of the proverbial tube of toothpaste and it won't be easy to get it back in. I predict IR at 6% at least by the end of the year, all those people who come off their fixed rate mortgages will be suffering. Historic lows reverting to the historical norm (6-7%) will mean people's mortgages increasing by 20-30%.

 

Of course we can argue forever about this. I don't understand why people think it's good that house prices are 3 times what they were 10 years ago. For themselves, their kids or the economy in general?

 

Tony you say house prices have never crashed? Do you remember the late 80's early 90's?

 

http://en.wikipedia.org/wiki/Housing_bubble

 

There appears to be a bit of a bubble followed by a "crash" then. Tens of thousand of houses were repossessed. Sheffield didn't bear the brunt of the last crash as the economy was fragile and house prices were low compared to incomes, not this time.

 

We are in new territory, the bubble has happened across the world due to the cheap money (the Bank of England increased our money supply by 14% last year), rising inflation, the carry trade (once the Bank of Japan increase their interest rates from 0%) and other socio-economic factors that are far too detailed to go into here.

 

Two threads on this, Jimmy... don't you get enough of this on HPC.co.uk? I can do without carry trade, M4 money supply and similar discussions on two forums at once. I come here to get a break from all that!

 

However, it's certainly a legitimate discussion and one that is covered in mind-bleeding detail over at http://www.housepricecrash.co.uk (for those that are interested there are some Sheffield threads on there too).

 

PS Interesting to see the "it's different this time" tone of your last paragraph: does that mean that you're a HPC bull

[pete_jim 10]

So interest rates will probably go up, and probably come down again, and go up again. If you look at the last 20 years or so then property has performed quite consistently. There will always be people predicting the worst and I'm not at the other end of the scale saying that property is the be all and end all of investing.

 

What I do know is that I want some income/capital when I give up work. From about 1991 two of us put money each month into a reputable pension scheme, as recommended by advisors and the government. After about 8 years the Chancellor raided private pensions and rendered our savings practically worthless.

 

We stopped paying into a pension scheme and bought some property instead. Somehow over the last few years we have bought property, enough to produce a decent income for retirement once the debts are paid off. I'm not disclosing figures but the debt is not too bad and probably represents 30% of the total equity. How big a crash would it take to wipe out that equity? And going on past performance of the pension funds it's all a bit of a gamble anyway.

[aussieboy 10]

How did the Chancellor raid your private pension? Just curious...

[pete_jim 10]

How did the Chancellor raid your private pension? Just curious...

 

He imposed some tax on private pension funds to the tune of billions in the late 90's, I can't remember the exact legislation. It wasn't the mis-selling thing. I'm sure that's why you have so many pension problems now, funds that had healthy reserves have seen tham dwindle away because of the taxation.

 

Basically nowadays you've got to start saving quite substantial sums early in your working career or you'll end up with nothing. It's another reason why the retirement age is creeping upwards.

[frankief 10]

Interest rate rise possible this Thursday? probably just 0.25% it's more a dripping tap than a dam bursting! Any views? Suppose wait and see.

[czechmate 10]

Interest rates gone up (OK only 0.25%) but another one expected in feb & then in march. Inflation figures looking bad. Today, announcement of end to long term fixed rate mortgages. Hmmm.....

 

End of long term fixed rate mortgages?

 

Woolwich (as an example):

 

10 Year fixed rate & Lifetime tracker:

http://www.barclays.co.uk/mortgages/google5/?WT.srch=1

 

Its also highly unlikely that the interest rate will rise by .75% within 3 months.

[czechmate 10]

FTB are in an awful position (unless they have money) and the decision to buy is not an option for many.

 

When you look at it logically:

 

Interest Rates:

You can be 100% sure interest rates will rise (but IMO no more then maximum of 1% a year). They have been and are currently still low. You need to base the mortgage on the possibility of at least a 1% rise per year upto 14/15%. If you cant afford a mortgage on this basis then you need to think very hard before making the decision to gamble on interest rates being lower.

 

Mortgage Borrowing's V Wage:

If we take Sheffield as an example, the house prices have caught up with the rest of the UK market especially at the lower end of the price scale. I dont know what the figure is for the average wage in Sheffield but lets take £20,000 (national average for graduates is 20-22k) as a mid range average for FTB considering the higher average age of FTB.

 

Lest say your looking to buy a city centre flat (topical) and the average price for a one/two bed flat is £120,000. Based on the 5 x salary calculation this allows a mortgage of £100,000 which obviously means you need to have a substantial deposit of other financial backing (parents?) to buy a flat to get you onto the propoerty ladder. Not realistic to have a £20,000 deposit so you look at the option of 7 x your salary and this offers the potential of £140,000 which is more realsitic when you consider you will have fees to buy, furniture to buy etc etc (and possible stamp duty). This is dependent on the borrowing rate which is obviously directly affected by the interest rates but as an example lets say at current rates this is approx £750 a month.

 

So you have managed to secure a mortgage which you can just about afford to repay at the current rates but what happens when the interest rates go up by 1% in a year (worst case). Thats when the proverbial hits the fan and thats what most FTB dont take into consideration.

 

This is great news for people with property to rent unless of ourse they are in the same position and find the rent doesnt cover the mortgage. This is where you take a decision based on your own circumstances and what you feel the market will do. Buy now, get on the ladder and risk a possible crash. IMO this wont happen but house prices will be more in line with actual values over the next 2-3 years, IMO prices are higher then actual at the moment and this is due to market fluctuations. OR do you rent, and save for a deposit and take advantage of a shift/reduction in prices in the next 2-3 years.

 

Good luck with the decision.

 

Ive looked into this in great detail over the last few months as I would like to move but the horrfying realisation for me is that if I wanted to buy a house now I wouldnt even get a mortgage for the house I currently live in let alone be able to pay the repayments.

[sugarcube 10]

i hate to say it, but i hope there is a crash (or at least a normalisation of the market) so that i can start thinking about a morgage. im lucky, i have a GF willing to go into one with me and together we could maybe just about afford a 2 up 2 down in or around an area like meersbrook, or burngreve.

BTL'ers, man, they make me angry!

[Cyclone 10]

czechmate - you ignore the fact that many people don't buy a first house until there are 2 incomes contributing to it.

So 2*20k, makes a 100k house (of which sheffield still has plenty) much more affordable.

[czechmate 10]

czechmate - you ignore the fact that many people don't buy a first house until there are 2 incomes contributing to it.

So 2*20k, makes a 100k house (of which sheffield still has plenty) much more affordable.

 

 

No I dont ignore the "fact" that a lot of FTB have two incomes but when you work out what that actually means in terms of additional mortgage borrowings its not significant. Unless one of the incomes is a much higher amount. I cant cover every possible situation, i'm just commenting on a general average FTB financial circumstances.

 

If you dont know or understand what I mean try this. Work out what you could afford to borrow on your own income then work out what it would be based on joint income. If the incomes are similar (within 10K) there wont be a massive difference and sometimes you can actually get a higher mortgage based on one salary then a joint salary. E.G. If its based on one salary you could get 7 x if its joint you will get typically 3 x some lenders go higher. Its not 7 x joint salary, but if you can find a lender that offers that I will stand corrected and well done providing information I wasnt aware of.