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Mortgage <= Rent

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so if i am able to buy a similar house, in a similar area to the place i'm currently renting and the Mortgage would be roughly the same as the rent, give or take. Including rates etc, is this a sensible enough time to think about buying.(getting wheels in motion, so buying in 6-12 months)

I am certain there are falls ahead. but the range i'm buying in <£100k 3bed-semi. i Can't see too much more downward movement as it would surely have a floor price due to potential rental income.

Would I be better getting on ladder, even with a small enough LTV ~ 85%.

I can more than afford the mortgage and will be able to substantially overpay, to ensure my equity grows in first few years.

Knowing that if shit hits fan, Redundancy/ IR Rises, i can cover the mortgage as it will be a small % of household income.

I've been a major Bear on here and still am for prices in general, i'm just wondering if i "under stretch" myself and get a place to own for the same as rent, is it starting to make financial sense.

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so if i am able to buy a similar house, in a similar area to the place i'm currently renting and the Mortgage would be roughly the same as the rent, give or take. Including rates etc, is this a sensible enough time to think about buying.(getting wheels in motion, so buying in 6-12 months)

I am certain there are falls ahead. but the range i'm buying in <£100k 3bed-semi. i Can't see too much more downward movement as it would surely have a floor price due to potential rental income.

Would I be better getting on ladder, even with a small enough LTV ~ 85%.

I can more than afford the mortgage and will be able to substantially overpay, to ensure my equity grows in first few years.

Knowing that if shit hits fan, Redundancy/ IR Rises, i can cover the mortgage as it will be a small % of household income.

I've been a major Bear on here and still am for prices in general, i'm just wondering if i "under stretch" myself and get a place to own for the same as rent, is it starting to make financial sense.

I'm sure these thoughts are going through the minds of many of us on here. The case for waiting another 18 or so is pretty compelling though: it is likely to be much more a "buyers market" and we will have a much better idea of long term IR policy and any rises that do (hopefully) occur will get priced in.

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At 8% interest, the mortgage would be <33% net income of 1 wage.

Yeah i can see your point about the overpaying. Can understand the need to have access to saving, should the worst happen.

I'm continually amazed at MSE's overpayment calculator and how overpayments can reduce the term and interest paid on a mortgage. Often for pretty trivial amounts overpaid.

I had initially wanted a good 3-bed semi in a good area, but I think it would make more sense to maybe compromise on the bigger house for a more affordable, safer bet.

I can see bad times ahead, but when I could be starting to pay down a mortgage and the experience of ownership without exposing myself to much risk, its starting to seem more attractive to see what’s out there and maybe explore my options of buying in more detail.

P.s what is the consensus on RV? RV +10% a fair price or is it now down to RV?

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At 8% interest, the mortgage would be <33% net income of 1 wage.

Yeah i can see your point about the overpaying. Can understand the need to have access to saving, should the worst happen.

I'm continually amazed at MSE's overpayment calculator and how overpayments can reduce the term and interest paid on a mortgage. Often for pretty trivial amounts overpaid.

I had initially wanted a good 3-bed semi in a good area, but I think it would make more sense to maybe compromise on the bigger house for a more affordable, safer bet.

I can see bad times ahead, but when I could be starting to pay down a mortgage and the experience of ownership without exposing myself to much risk, its starting to seem more attractive to see what’s out there and maybe explore my options of buying in more detail.

P.s what is the consensus on RV? RV +10% a fair price or is it now down to RV?

it depends on the house i think wrt RV. Some houses are valued too high at the time.

But at the minute its hard to see many decent 3 bed semis coming down below 100k as you say

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Remember though that we are at a more advanced state of the crash. The news today is that NI is 49.9% off peak prices. Our standard semis are becoming much more affordable now.

Currently:

We have got here in 4 yrs with interest rates at 300 yr lows

Extreme bank forebearance aggressively pushed by the Govt (bankowners in many cases) and to a lesser extent NAMA

Average FTB age 37

VAT was reduced for 1 yr

Bank and developer schemes for house purchasers - momentum

Little by way of cuts to public expenditure

Domestic rates frozen for at least 3 yrs - no water charges

Coming up:

Rate rises pencilled in by markets - ECB already started

Mortgage relief (SMI) and trackers coming to an end for many

Spring bounce over (didn't happen)

Further contraction in public sector (with very wide consumer and business ripple effects) and construction sector

Vacant properties are soon to be rated

Developers going bust day and daily with stock to 'finish off'

Student debt sky rocketing

Sentiment and confidence reducing - the 'word on the street' is now negative re debt and property and esp property debt. Prices are falling and transparently so. Most people will have heard of someone who overstreched and is now in difficulty and regretting it.

Weekly court cases of buyers trying to wriggle out of investment flat purchases

Inflation/cost of living stubbornly high - esp petrol, oil heating, gas etc. combined with pay freezes etc

VAT increased up to what it was, then up again - £4 Billion of cuts due including benefit cuts

Highest proportion of young people unemployed

Continued restriction of credit and mortgages to those proven to be creditworthy rather than any Tom, Dick or Harry. Interest only and self cert mortgages frowned upon.

Euro situation and middle east with a long way to go

Growth forecasts being revised downwards by main bodies - even the Northern Bank

Bank of mum and dad coming to an end - negative equity precludes - does not stand up to repeat withdrawls.

Tourism won't be helped by negative 'troubles' images

Plenty of other stuff I have missed!!!!!!

So even if/when the average house becomes 'affordable', I don't see any beating down of doors to start 'snapping' them up any time soon. We are NI not London (or Brazil).

Most logical people, I would have thought, will see the falling knives scenario and be a lot more circumspect re property purchase for a year or two yet - unless absolutely necessary.

I anticipate a vastly different landscape within the next 2 yrs as HPC embeds and goes mainstream, which it is doing (in ROI prices are back to 2000). And that's without any surprises lurking in the undergrowth.

I am suggesting the HPC 'stage' may indeed be advanced (as evidenced by 49.9% drops) in relatively benign circumstances, ie the housing market has been sheltered by policy and sentiment.Both are coming to an end.

There may be trouble ahead - I, for one, am betting on it.

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Is there a method of accurately valuing a house based on it's rental income?

Would this allow us to identify a floor for prices of certain properties?

That depends particularly with regards to smaller houses. If you look at rental prices the variation between big 4+ houses and small 3 bed semis isn't really that much compared to the often large capital value differences. This is caused in part by HB and the artificial floor it creates. If trying to use rental yield as a basis to calculate purchase price you would have to consider potential (or IMHO inevitable ) falls in HB payments. An average 3 bed semis rent may 500 today but with a very large percentage of the NI market catering to HB and HB falls will destroy the average.

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so if i am able to buy a similar house, in a similar area to the place i'm currently renting and the Mortgage would be roughly the same as the rent, give or take. Including rates etc, is this a sensible enough time to think about buying.(getting wheels in motion, so buying in 6-12 months)

I am certain there are falls ahead. but the range i'm buying in <£100k 3bed-semi. i Can't see too much more downward movement as it would surely have a floor price due to potential rental income.

Would I be better getting on ladder, even with a small enough LTV ~ 85%.

I can more than afford the mortgage and will be able to substantially overpay, to ensure my equity grows in first few years.

Knowing that if shit hits fan, Redundancy/ IR Rises, i can cover the mortgage as it will be a small % of household income.

I've been a major Bear on here and still am for prices in general, i'm just wondering if i "under stretch" myself and get a place to own for the same as rent, is it starting to make financial sense.

I would ask you to think about why would you want to make a leveraged investment on a depreciating asset (your assessment, not mine). After 2 years on a 25 yr repayment mortgage of £100k, you will only have paid off about £3.5k on the outstanding capital, which is less than £150 month. Maybe the difference between renting and total mortgage costs? There must be a high probability that house prices will be at least 3.5% lower over that period, with many informed commentators still estimating 20%+ falls from here.

As you say, the risk with house prices is still to the downside just now so what's the harm in sitting it out for another 12 months to see what happens. Our bubble within a wider UK bubble might have been dealt with in local prices having fallen by 50%, but many informed commentators and economists are convinced we are just about to start another leg down across the UK generally. The economic outlook is dire so no support there and the press is full of downbeat messages about the housing market. When we do reach the bottom, it's most unlikely that there will be any quick rebound so there's no need to panic about missing the boat.

In pure financial terms it makes no pragmatic sense in my view to buy at current average prices. If you can buy at 20% discount, then perhaps that will give you a big enough margin to break even over say 3 years (ask yourself why do mortgage providers build this level of deposit into many of their products).

I think you are taking on a high level of risk on a very illiquid asset for no substantial upside potential. If you are a FTBer then I would have to suggest that you will have no previous experience of when houses were really affordable to know that they definitely aren't now, just because they are lower than 3 years ago doesn't make them cheap.

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At 8% interest, the mortgage would be <33% net income of 1 wage.

Yeah i can see your point about the overpaying. Can understand the need to have access to saving, should the worst happen.

I'm continually amazed at MSE's overpayment calculator and how overpayments can reduce the term and interest paid on a mortgage. Often for pretty trivial amounts overpaid.

I had initially wanted a good 3-bed semi in a good area, but I think it would make more sense to maybe compromise on the bigger house for a more affordable, safer bet.

I can see bad times ahead, but when I could be starting to pay down a mortgage and the experience of ownership without exposing myself to much risk, its starting to seem more attractive to see what's out there and maybe explore my options of buying in more detail.

P.s what is the consensus on RV? RV +10% a fair price or is it now down to RV?

i was thinking of buying at 135000 in jan 2011 the house i was looking at is now 15000 cheaper saw this with property bee witch i got from this hpc great site i wont be buying yet baware any one that does

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I would ask you to think about why would you want to make a leveraged investment on a depreciating asset (your assessment, not mine). After 2 years on a 25 yr repayment mortgage of £100k, you will only have paid off about £3.5k on the outstanding capital, which is less than £150 month. Maybe the difference between renting and total mortgage costs? There must be a high probability that house prices will be at least 3.5% lower over that period, with many informed commentators still estimating 20%+ falls from here.

I'm not making an investment. I'm thinking of making a purchase.

It'll will be most likely 12 months before I have a full deposit in place and all my boats in a row. So not diving in quiet yet, but after reading this site for 3 years, it has opened my eyes. I have still a very negative view on the economy as a whole.

Looking on PP and PN its clear the market has scattered all directions. I could get a 6 bed house for 150,000 and down the street pay £170k for a 2 bed semi.

I have always said (might also have said in previous posts that for me, £100k for a 3-bed semi is a fair price. IMO.

With no rush to buy, i'd have time to make low ball offers to EA's, and ensure I get a decent deal.

I would be happy enough at this stage to pay what I would think is a fair price for a fair house, and getting on with living.

I can understand people who are looking to pay ~£150k and get large 3-bed semi's/detached etc holding off. I can see falls there.

Can anyone see a time when a 3 bed semi in nominal terms goes much lower than £90k?

Its quite clear that there will be no government or BOE policy which tips the masses over the edge and collapses the property market. The property owning baby boomers have too much control and too much to lose.

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I'm not making an investment. I'm thinking of making a purchase.

It'll will be most likely 12 months before I have a full deposit in place and all my boats in a row. So not diving in quiet yet, but after reading this site for 3 years, it has opened my eyes. I have still a very negative view on the economy as a whole.

Looking on PP and PN its clear the market has scattered all directions. I could get a 6 bed house for 150,000 and down the street pay £170k for a 2 bed semi.

I have always said (might also have said in previous posts that for me, £100k for a 3-bed semi is a fair price. IMO.

With no rush to buy, i'd have time to make low ball offers to EA's, and ensure I get a decent deal.

I would be happy enough at this stage to pay what I would think is a fair price for a fair house, and getting on with living.

I can understand people who are looking to pay ~£150k and get large 3-bed semi's/detached etc holding off. I can see falls there.

Can anyone see a time when a 3 bed semi in nominal terms goes much lower than £90k?

Its quite clear that there will be no government or BOE policy which tips the masses over the edge and collapses the property market. The property owning baby boomers have too much control and too much to lose.

You had couched the question in terms of whether it made financial sense, hence the tone of the reply but at current prices I couldn't ignore the investment dimension to any decision I would make. When EAs tell you that you are buying a home not an investment, then you know its a buyers market. Anyway it seems that you're not about to move just yet so a few more months will give you more confirmation of where prices are going. If you are fed up renting then that's a different matter and I can fully appreciate how you might be getting a tad frustrated. However I think this is the best (worse) set of economic conditions that has existed in living memory for house prices to revert to the average price/income ratio and by necessity to fall below that for a period - by implication prices would have 20% or more to fall yet.

The market will eventually correct itself despite of Government and BOE policy. If FTBers can't afford to buy then prices will have to come down. Ultimately there is no market without FTBers.

Edited by lolacarrascal

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I agree RV is only a very rough guide. The property I bought at the beginning of the year (a repo) had an RV of 130K (on the high side imho) although I paid 110K. My particular house was sold in 2007 (September) for 180K . Through the wonders of 'tinternet I discovered that back then the property was for sale for 200K and the estate agent was marketing it as 'excellent value for money'. The owner at the time was in financial do-do and needed to sell. The buyer, who I don't think ever moved in, probably thought they were getting a bargain - yet they were the ones ultimately repossessed.

That said, I can see the value of similar homes to mine going lower still (perhaps sub 100K?) and while I'm not excited by that prospect I knew it was a real possibility when I bought. It's all down to what is right for you. I needed somewhere to live and I was getting below inflation returns from my deposit money. Now my mortgage payments are substantially less than what it would cost to rent a similar property and I still have rainy day savings.

I'm happy that I waited - I'm just sorry that friends and family didn't follow my advice (and the advice of this forum) and hold fire. I know so many people who have been truly shafted by what has happened and I worry that they have seriously damaged their life prospects by doing what everyone was egging them on to do and 'getting on the ladder before its too late'. How hollow those words ring now! It has been a total disaster for everyone concerned.

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As HPCwhen has said, if you need somewhere to live and are sick of renting then I think buying this year or early next year is not the worst decision in the world. Things are changing rapidly where I am based such as those typical 3 bed semis now suddenly appearing at sub 100k prices. Just 5 months ago it would be rare to find a good 3 bed semi that required little work to live in for under 100k and now there are about a dozen in my area. That shows that sentiment from sellers and EAs is changing which can only be a good thing for would be buyers. Don't let people put you off buying a house because it doesnt stack up as an investment. It's about peace of mind and having a roof over your head that you control and doing what you want with it without asking permission from a landlord. If that peace of mind is cheaper than renting then it is a fairly easy decision to make in my opinion.

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Is there a method of accurately valuing a house based on it's rental income?

Would this allow us to identify a floor for prices of certain properties?

Rents and prices are mutually dependent - falling prices will fed through into reduced rents.

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I agree RV is only a very rough guide. The property I bought at the beginning of the year (a repo) had an RV of 130K (on the high side imho) although I paid 110K. My particular house was sold in 2007 (September) for 180K . Through the wonders of 'tinternet I discovered that back then the property was for sale for 200K and the estate agent was marketing it as 'excellent value for money'. The owner at the time was in financial do-do and needed to sell. The buyer, who I don't think ever moved in, probably thought they were getting a bargain - yet they were the ones ultimately repossessed.

Thats the other option of course - become a predatory buyer, just go around making loads of 30% below asking offers biding your time. As effectively a cash buyer you get a bite at some point.

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As HPCwhen has said, if you need somewhere to live and are sick of renting then I think buying this year or early next year is not the worst decision in the world. Things are changing rapidly where I am based such as those typical 3 bed semis now suddenly appearing at sub 100k prices. Just 5 months ago it would be rare to find a good 3 bed semi that required little work to live in for under 100k and now there are about a dozen in my area. That shows that sentiment from sellers and EAs is changing which can only be a good thing for would be buyers. Don't let people put you off buying a house because it doesnt stack up as an investment. It's about peace of mind and having a roof over your head that you control and doing what you want with it without asking permission from a landlord. If that peace of mind is cheaper than renting then it is a fairly easy decision to make in my opinion.

Yea, don't be put off making the biggest purchase of your life just because it doesn't stack up as an investment!

What if buying at today's prices isn't cheaper than renting next year or the year after? You expect base rates to stay this low forever?

Seriously - you tell people this? You just made my point about EAs.

Edited by lolacarrascal

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  • 317 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% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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