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Finally Found A House Worth Buying....

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I've been on this site for quite a while (more or less since the beginning, under a former user name), watching the market and waiting.

I do believe strongly that houses are going to take another dip...

...but....

....I've found a house I really like, and as it's only £140,000 and I have £80,000 deposit, I'm going for it. It's absolutely right for me, and even if prices go down by 50 per cent, I will be ok.

I don't want to discuss here whether this is a good idea - it probably isn't, but I'm doing it anyway after eight years of careful thought.

So my question is, what sort of mortgage would you go for?

I do believe that interest rates are going to go up, but the difference between a fixed rate and a tracker is a fairish whack.

So, should I take the easy life now, while I need spare cash to kit the house out and get settled in, or should I bite the bullet and take the hit now, pay the higher price, but be laughing when the interest rate has shot up?

Also, there is a very good chance that I will come into a windfall in the next year or two (not inheritance - it would be ghoulish to anticipate that), with which I could pay the mortgage off with plenty to spare, if I wanted to...

...so should I consider interest only for the next two years? Again, this would give me LOTS of spare cash when I'm going to need to buy things like toilet brushes and hat stands and so on.

Any help or advice greatly appreciated - I'm a first time buyer (goodness, I never thought I'd type those words here) and while I've learned a lot about economics and money on this site, I've gleaned nothing about mortgages.

Thanks in advance - and, please, this is not a "is this a good time to buy" thread.

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Firstly, I am not a financial advisor and the decision is your own. If I were in a similar position, and was able to save 80k in a short amount of time, and absolutely had to buy this house. I would go on a tracker- there are some competative deals with low LTV's. I would 'guess' that rates are not going to go much above 3% in the next 18 months (currency crisis withstanding), so you should be able to pay a large amount of the remaining 60k off in that time. and then no problem.

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If I was buying now then I'd go for a 10year fix. But if your windfall is a dead cert then go for the IO tracker you want to pay as little interest as possible as you'll be repayingbthe whole thing in year or two anyway.

Make sure you take advantage of the Market and go for hefty discount!

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I've been on this site for quite a while (more or less since the beginning, under a former user name), watching the market and waiting.

I do believe strongly that houses are going to take another dip...

...but....

....I've found a house I really like, and as it's only £140,000 and I have £80,000 deposit, I'm going for it. It's absolutely right for me, and even if prices go down by 50 per cent, I will be ok.

I don't want to discuss here whether this is a good idea - it probably isn't, but I'm doing it anyway after eight years of careful thought.

So my question is, what sort of mortgage would you go for?

I do believe that interest rates are going to go up, but the difference between a fixed rate and a tracker is a fairish whack.

So, should I take the easy life now, while I need spare cash to kit the house out and get settled in, or should I bite the bullet and take the hit now, pay the higher price, but be laughing when the interest rate has shot up?

Also, there is a very good chance that I will come into a windfall in the next year or two (not inheritance - it would be ghoulish to anticipate that), with which I could pay the mortgage off with plenty to spare, if I wanted to...

...so should I consider interest only for the next two years? Again, this would give me LOTS of spare cash when I'm going to need to buy things like toilet brushes and hat stands and so on.

Any help or advice greatly appreciated - I'm a first time buyer (goodness, I never thought I'd type those words here) and while I've learned a lot about economics and money on this site, I've gleaned nothing about mortgages.

Thanks in advance - and, please, this is not a "is this a good time to buy" thread.

As for finance, its not possible to advice you.

1. You cant trust any advice you receive from anyone here...they dont know you, and more importantly, you dont know them.

2. no-one here has a clue to your financial position.

3. dont give that information on a public network...you will be seen as something you hope not to be perceived as.

Good luck in your house hunt.

no-one should condemn you.

All I want is affordable housing for all. In my case, preferably without a mortgage, which I see as a scam.

This forum is a good place to learn...so for all, please take what you read as material, but not gospel...and that includes what I say.

Edited by Bloo Loo

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If you don't come into the money you are expecting, how long would it take you to clear the remaining £60k?

If I was in your position, and was sure I would clear the remaining debt in say 2 years, I would probably just go for the lowest interest rate I could find, regardless of the type of mortgage. Obviously make sure the mortgage has no early repayment penalty :).

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Usual disclaimers apply (not financial advice, speak to a professional, blah blah blah).

For ultimate peace of mind, you know exactly how much you'll be paying with a fixed rate - especially since you plan to pay it off before the fixed period expires. However, based on the circumstances you have outlined, I think a tracker would be better for you for now. The main reason is that the arrangement fees (which are fixed per mortgage) will be a disproportionate amount on such a low mortgage. You easily satisfy the LTV requirements for any of the low arrangement fee products (http://www.moneysupermarket.com/mortgages/).

We all know that interest rates will have to go up at some point and you can calculate the amount that it would have to go up in order for you to lose out. That's the gamble that you take.

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I've been on this site for quite a while (more or less since the beginning, under a former user name), watching the market and waiting.

I do believe strongly that houses are going to take another dip...

...but....

....I've found a house I really like, and as it's only £140,000 and I have £80,000 deposit, I'm going for it. It's absolutely right for me, and even if prices go down by 50 per cent, I will be ok.

I don't want to discuss here whether this is a good idea - it probably isn't, but I'm doing it anyway after eight years of careful thought.

So my question is, what sort of mortgage would you go for?

I do believe that interest rates are going to go up, but the difference between a fixed rate and a tracker is a fairish whack.

So, should I take the easy life now, while I need spare cash to kit the house out and get settled in, or should I bite the bullet and take the hit now, pay the higher price, but be laughing when the interest rate has shot up?

Also, there is a very good chance that I will come into a windfall in the next year or two (not inheritance - it would be ghoulish to anticipate that), with which I could pay the mortgage off with plenty to spare, if I wanted to...

...so should I consider interest only for the next two years? Again, this would give me LOTS of spare cash when I'm going to need to buy things like toilet brushes and hat stands and so on.

Any help or advice greatly appreciated - I'm a first time buyer (goodness, I never thought I'd type those words here) and while I've learned a lot about economics and money on this site, I've gleaned nothing about mortgages.

Thanks in advance - and, please, this is not a "is this a good time to buy" thread.

I'd go for offset if I were you. When you offset your savings effectively earn the same interest (net of tax) as you are paying on the mortgage. Your mortgage will not be very big and I'm sure you'd start paying it down quickly. If your circumstances change you can access the money you've paid down.

You can get fixed rate offsets too.

I'd avoid tracker mortgages myself - we live in unpredicatable times. You might find in 2 years you go on to a high SVR and can't change mortgage provider easily.

Whereabouts in the country are you? Always intrigues me when people talk about buying a house they would be happy with for £140k - where I live residential property at that price might include a starter home (bedsit) in a grotty area.

Edited by Let's get it right

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So my question is, what sort of mortgage would you go for?

Same situation as me, right house came up from a forced seller so going for it. I've gone for an HSBC lifetime tracker special, base + 1.69%. £99 fee, ~£250 valuation, no repayment penalties. Tracks for the term. I have savings at RPI+1% tax-free (NS&I) so am getting a larger mortgage then necessary and gaining on the interest rate difference.

I expect base rates to stay low but the risk is of a crisis if the ConDem cuts don't happen so will be overpaying just in case.

https://mortgages.hsbc.co.uk/product/188-life-time-tracker-special

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Thanks for the replies.

I do understand that I'm not talking to financial advisors, and I've done my own research, I just wanted some opinions and food for thought. Which I have now got, thanks to some very useful posts.

Let's get it right - I'm in Worcestershire. Prices generally aren't too bad in my town, but this particular house is a really good price. Three beds, well looked after, plenty of space downstairs. As I say, the first house in a number of years that's made me want to take the plunge.

Thanks again you lot, plenty there for me to think about.

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Same situation as me, right house came up from a forced seller so going for it. I've gone for an HSBC lifetime tracker special, base + 1.69%. £99 fee, ~£250 valuation, no repayment penalties. Tracks for the term. I have savings at RPI+1% tax-free (NS&I) so am getting a larger mortgage then necessary and gaining on the interest rate difference.

I expect base rates to stay low but the risk is of a crisis if the ConDem cuts don't happen so will be overpaying just in case.

https://mortgages.hsbc.co.uk/product/188-life-time-tracker-special

+1

Life time tracker definitely. I think banks are so risk adverse that they wont give you a good deal on a fixed. Before the credit crunch I think there would have been close to a 50/50 chance of winning on a fix deal now I would only give you 80/20 the banks don't want to lose any more money. Offset mortgages sound like a good idea I had one in the past but when I seen a mortgage adviser and seen the figures the offset just didn't stack up.

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Thanks for the replies.

I do understand that I'm not talking to financial advisors, and I've done my own research, I just wanted some opinions and food for thought. Which I have now got, thanks to some very useful posts.

Let's get it right - I'm in Worcestershire. Prices generally aren't too bad in my town, but this particular house is a really good price. Three beds, well looked after, plenty of space downstairs. As I say, the first house in a number of years that's made me want to take the plunge.

Thanks again you lot, plenty there for me to think about.

Another one to consider is the First Direct offset trackers if you are likely to have highly variable income and outgoings. i.e. expected windfalls and initial home improvements.

The rate is a bit higher (extra +0.3%?) but the flexibility may be worth it to you.

After 7 years of thinking everything is at least £100K overpriced, the forced sellers are coming out of the woodwork and I found two houses worth buying recently. The one I am going for is on a big plot with views and privacy, larger and cheaper than similar bare plots have been priced at. One funny way of looking at it is that the house itself I am buying has a negative price, now that's what I call a crash.

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Another one to consider is the First Direct offset trackers if you are likely to have highly variable income and outgoings. i.e. expected windfalls and initial home improvements.

The rate is a bit higher (extra +0.3%?) but the flexibility may be worth it to you.

After 7 years of thinking everything is at least £100K overpriced, the forced sellers are coming out of the woodwork and I found two houses worth buying recently. The one I am going for is on a big plot with views and privacy, larger and cheaper than similar bare plots have been priced at. One funny way of looking at it is that the house itself I am buying has a negative price, now that's what I call a crash.

I think I will have to take back what I said about offset mortgages. When the adviser did the calculations for me it worked out at over £100 more it really was a no brainer. I reckon this one is an extra 0.4 and £20 a month more in interest may be worth it.

Edited by gf3

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Appreciate everything you said above re finding a good house at the right price, but the next 2 or 3 months are going to be absolutely key in the housing market, and hopefully totally brutal.

My sums aren't that far off yours, but I can see that the first time buyer market like this is being hard due to no mortgage availability.

I would personally sit tight for a few more months. You never know, it might still be there and the seller will be somewhat more motivated in the depths of December.

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If I was buying now then I'd go for a 10year fix. But if your windfall is a dead cert then go for the IO tracker you want to pay as little interest as possible as you'll be repayingbthe whole thing in year or two anyway.

Make sure you take advantage of the Market and go for hefty discount!

Are there any 10 year fixes out there at the moment? When I last looked couldn't see anything over 5

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With a mortgage of £60k — pretty small by today's standards — I'd say you can afford to go for a lifetime tracker because IR hikes won't affect you as much as someone on, say, a £150k mortgage.

For example, if you're on First Direct's lifetime tracker of BoEBR + 1.89% (with offset facility), you'd pay 2.39% today which = £267 per month.

If the BoEBR went up to 5.5%, you'd pay 7.39% which = £444 per month

If the BoEBR went up to 7.5%, you'd pay 9.39% which = £525 per month

etc

Of course, only you can decide whether you can afford the payments if they go to those levels.

The other bonus of FD's offset mortgages is that they are in effect interest-only - it's up to you to pay into the offset fund to cover the actual capital repayment - but does give you the advantage of just paying the interest if interest rates go mental (which many on this board think will happen!).

Good luck.

PS I have no involvement with First Direct and don't even have my mortgage with them myself - just heard lots of good noises about them.

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Firstly, I'd do an interest rate exercise up to 15%. If you can afford it, then I'd go for a variable rate mortgage as this negates the reason for 'a fixed rate mortgage', unless of course, you are in the hyper inflation camp then go for as long as you can on a fixed rate.

Secondly, I wouldn't touch an IO mortgage, unless you have a proper proven vehicle for paying it off at the end of the life time of the mortgage.

Thirdly, good luck.

I think there is little chance that interest rates will go up to 15%. Yes I know Lamont pushed them up to 15% to try and stop the pound falling out of the ERM on black Wednesday. But you can't go through life without taking calculated risks. millions of people would lose there homes if interest rates went up that high. which is a pretty good reason that they won't.

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I'm sure I've heard this before on here? <_<

But when won't be, going forward? :unsure:

I've monitored this site for 3 or 4 years and agree it's always been 'around the corner' to an extent.

However, I genuinely believe that the next few months are a key time:

- HPI indices going negative month on month

- Biggest spending cuts in a generation

- Highest unemployment in a generation

- Reduction of housing benefit

- Reduction of SMI

- Capital gains changes on BTL

- Ongoing mortgage availability issues

- Supply glut

- Conservative government

- A genuine change in sentiment detected in the media (cf rising house prices are a bad thing)

- No QE in action

Remember we had a house price crash of 15 - 20% down. Drastic steps re-inflated the market and a lot of people held back from selling whilst waiting for 'the market to recover.' I don't think it will take many of the above to change that equation in their mind.

I will be buying either way in early 2011. I respect anybodies right to do the same, but I would really advise to wait till the winter and remove a lot of risk from the purchase.

Edit > Many of the above are particularly pronounced in the first time buyer market where I and the OP are looking.

Edited by Kyoto

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Have you though about a Capped Tracker, like something from Brittania / Co-op?

5 year 2.49% above base, capped at a ceiling of 5.99%.

I decided it was the best of both a Fix and Tracker if interest rates dont move up a long way for a while..

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I think there is little chance that interest rates will go up to 15%. Yes I know Lamont pushed them up to 15% to try and stop the pound falling out of the ERM on black Wednesday. But you can't go through life without taking calculated risks. millions of people would lose there homes if interest rates went up that high. which is a pretty good reason that they won't.

I think that's right. But I would stress test to about 10%.

more importantly if you think rates could climb that high dont put down more of a deposit than you need to. 40% deposit is more than enough to get the best rates - anything else you're just giving the bank more control of your money than is necessary. With a 40% deposit on a variable rate you are paying, what, 2.5% or something crazy. That's free money so take as much of it as you can and keep 20-30 extra savings to invest or as a cash fund.

This will mean that if you find yourself in trouble you have a buffer to keep paying the mortgage if you want.

Or - if the worst hopes of those on here come to pass - and prices drop a huge amount and maybe you've misjudged the property and are overpaying (not likely for an hpcer but quite possible) - such that the entire 80K is wiped out, you do still have the option of doing a runner with the 20-30k. Not much of an option I know but if the world goes to hell it could be a better option than a thank-you letter from the bank when you hand the keys back.

It is also possible that we go hyper, but I would guess you would have the chance to fix at 8-10% when inflation gets to 6-8%. I think there would have to be at least a year or two of medium level inflation of that order to get expectations up and base money moving before we really went hyper. Certainly long enough to fix.

That's your extremes sorted. Probably an 80% chance that we dont end up in either tin foil hat extremity; in which case you'll be fine and will probably find a variable rate marginally cheaper in the long run. Unless you're an extremely talented fixed interest rates trader and have taken an informed view that rates are more likely to move above the yield curve than not - in which case by all means fix. But you're not are you? Whatever you do dont bother fixing for less than 5 years - unless you are matching the term of the mortgage or selecting a period in which you know you can save enough to survive your most extreme stress tests.

Personally if i were you I would get the price down to 120 using anything at all in the survey, prevaricating and hoping that in a month or two sellers will likely be very scared indeed. Then I would I/O with 30k down and keep 50k for diversified investments 20 long term deposits 20 equities 10 exotics. Then keep an eye on the mortgage market and should the best fix available to you ever go above, say, 8 % fix toute suite.

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I think that's right. But I would stress test to about 10%.

more importantly if you think rates could climb that high dont put down more of a deposit than you need to. 40% deposit is more than enough to get the best rates - anything else you're just giving the bank more control of your money than is necessary. With a 40% deposit on a variable rate you are paying, what, 2.5% or something crazy. That's free money so take as much of it as you can and keep 20-30 extra savings to invest or as a cash fund.

This will mean that if you find yourself in trouble you have a buffer to keep paying the mortgage if you want.

Or - if the worst hopes of those on here come to pass - and prices drop a huge amount and maybe you've misjudged the property and are overpaying (not likely for an hpcer but quite possible) - such that the entire 80K is wiped out, you do still have the option of doing a runner with the 20-30k. Not much of an option I know but if the world goes to hell it could be a better option than a thank-you letter from the bank when you hand the keys back.

It is also possible that we go hyper, but I would guess you would have the chance to fix at 8-10% when inflation gets to 6-8%. I think there would have to be at least a year or two of medium level inflation of that order to get expectations up and base money moving before we really went hyper. Certainly long enough to fix.

That's your extremes sorted. Probably an 80% chance that we dont end up in either tin foil hat extremity; in which case you'll be fine and will probably find a variable rate marginally cheaper in the long run. Unless you're an extremely talented fixed interest rates trader and have taken an informed view that rates are more likely to move above the yield curve than not - in which case by all means fix. But you're not are you? Whatever you do dont bother fixing for less than 5 years - unless you are matching the term of the mortgage or selecting a period in which you know you can save enough to survive your most extreme stress tests.

Personally if i were you I would get the price down to 120 using anything at all in the survey, prevaricating and hoping that in a month or two sellers will likely be very scared indeed. Then I would I/O with 30k down and keep 50k for diversified investments 20 long term deposits 20 equities 10 exotics. Then keep an eye on the mortgage market and should the best fix available to you ever go above, say, 8 % fix toute suite.

Thanks everyone for the advice. It has really helped to focus my mind. I'm just off to see the mortgage man at Lloyds now - but only to get a go-ahead in principle so I can proceed with the sale - I won't necessarily get the actual mortgage with Lloyds.

Despite my concerns about coming inflation, I think I'm going to go for a two-year interest-only tracker - because it's so cheap and I will be able to save some cash in the short term.

Thanks again to those who took the time to give me such thought-provoking advice.

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  • 152 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
      • up 2.5%
      • up 5%



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