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Answer To 'should I Buy Now Or Rent' Questions


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@ testicle (?) (I can't find your original posting but with reference to other colleagues in work place challenging 'bad time to buy' view)

Your comments reminded me of a former boss. I was trying to explain to him that his company didn't have a future as it stood, I pointed out all the indicators that business could only contract but he wasn't prepared to have that conversation. His final reposte to me was, "I keep on going until something stops me." Many people don't believe until they see - they don't read signs they read tangible evidence. I have heard it said by health and safety professionals that the biggest obstacle to rescuing people from burning buildings is persuading them that the building is on fire. Until they see the flames and smell the smoke they assume that the fire alarms are a fire drill. (There are of course loads more examples, such as people living on fault lines etc in the belief that earthquakes do happen but not while they are around, and so on).

I am probably spelling out the blindingly obvious but there's my tuppence worth all the same.

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On a side note, I met an old HPC bear for a drink the other day.

I say "old", because he stopped posting when he went off to work for some public sector credit fueled pseudo mini quango expert type organisation for double the money. Recently, all we seem to talk about is houses he is thinking of buying.

Anyway, he is now fully back in the bear fold, thinking it would be madness to buy property right now. In fact, he is probably more bearish than me. But then, I am a horse.

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On a side note, I met an old HPC bear for a drink the other day.

I say "old", because he stopped posting when he went off to work for some public sector credit fueled pseudo mini quango expert type organisation for double the money. Recently, all we seem to talk about is houses he is thinking of buying.

Anyway, he is now fully back in the bear fold, thinking it would be madness to buy property right now. In fact, he is probably more bearish than me. But then, I am a horse.

interesting question - which is more hung - horse or bear?

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On a side note, I met an old HPC bear for a drink the other day.

I say "old", because he stopped posting when he went off to work for some public sector credit fueled pseudo mini quango expert type organisation for double the money. Recently, all we seem to talk about is houses he is thinking of buying.

Anyway, he is now fully back in the bear fold, thinking it would be madness to buy property right now. In fact, he is probably more bearish than me. But then, I am a horse.

Interesting anecdote. Who was the poster?

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After years of observing my cats, I'm pretty sure that they have a clear sense of self, fairness, and have some theory of mind, and thus some form of consciousness. I cannot prove this, but neither can I prove that any other human is conscious either. Some of the behavioural experiments people are conducting aiming to provide evidence for and against animal consciousness are getting quite clever though.

Have you seen that recent news article about the chimpanzees showing human-like behaviour towards a dying and then dead member of their pack? Really interesting.

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Thinking of buying soon, Post Office have offered me a competitive mortgage fixed repayment 5.05% over 5 years 25yr term to borrow £290,000 I have £65,000 deposit.

House is on at £390,000 nice 4 bed detached lovely area in Bournemouth thinking of offering £340,000 and seeing what I can get.

My reasoning for buying now, rates will shoot up causing repayments to be unviable and the number of quality houses on the market will decrease.

Any thoughts on this?

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Thinking of buying soon, Post Office have offered me a competitive mortgage fixed repayment 5.05% over 5 years 25yr term to borrow £290,000 I have £65,000 deposit.

House is on at £390,000 nice 4 bed detached lovely area in Bournemouth thinking of offering £340,000 and seeing what I can get.

My reasoning for buying now, rates will shoot up causing repayments to be unviable and the number of quality houses on the market will decrease.

Any thoughts on this?

According to the news this morning, the housing market is on the up again.... so may be this is the time to buy.

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Thinking of buying soon, Post Office have offered me a competitive mortgage fixed repayment 5.05% over 5 years 25yr term to borrow £290,000 I have £65,000 deposit.

House is on at £390,000 nice 4 bed detached lovely area in Bournemouth thinking of offering £340,000 and seeing what I can get.

My reasoning for buying now, rates will shoot up causing repayments to be unviable and the number of quality houses on the market will decrease.

Any thoughts on this?

By my calculations, you have a 19.12% deposit - if you could make that up to 20% you might find a better deal. Barclays could offer me a 3.5% mortgage, but that was with a 25% deposit and the fixed term wasn't as long.

I'm wondering what will happen to the market when the lib dem / conservative coalition start making 25% cuts to public sector jobs to pay off the £2trillion national debt left by labour, is it really a good time to buy?

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Interest rates & therefore mortgage rates are going to rise in the near future. Another incentive to buy now before borrowing becomes more expensive, (unless you think house prices are going to fall in the near future ?)

I have just been offered a 90% Mortgage (Santander) at a fixed for 2 years 2.5% over base. Then converts to a Tracker at 3.4% over base.

Good deal as far as I am concerned. Cheaper in the first 2 years than my rent currently :-)

VM

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Interest rates & therefore mortgage rates are going to rise in the near future. Another incentive to buy now before borrowing becomes more expensive, (unless you think house prices are going to fall in the near future ?)

Well yes, that is the question isn't it. I would imagine that if interest rates rise, house prices will come down. You only get a five year fix. So if you buy at low rates and a high price, in five years time you'll be paying a higher rate on a bigger amount.

If I was going to buy now, I'd be thinking that interest rates are not going to go up, therefore get a cheaper tracker and reap the rewards of the low base rate.

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With the risk of saying it is different this time, the next 60 years are looking a lot less positive for the astronomical growth in the housing market than we have seen in the past 60 years..

Some believe Aug 2007 (as I do until the evidence suggests otherwise) was the end of a 60 year mega debt bubble (with the focus on personal debt). House prices are a function of debt and given debt has grown exponentially houses have followed. Anyone buying (at a reasonable point in the housing cycle) over the 60 years could not fail in property. What a great environment to live in where your most essential life requirement and expenditure actual becomes your best life investment. History tells us life is not always this good to 70% of the population.

A house does not have to increase in value to be a good investment. Once you have paid the mortgage off you never have to pay rent again. So if you can afford to do it then buying is a sensible thing to do IMO, as long as you are not banking on house price inflation to make you money and you can afford interest rate rises to a higher level (though I am not sure this will happen to be honest).

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OK, there seem to be lots of posts popping up asking 'should I buy now or rent'.

And as Paddles has stated they are always from recent new members with less than 10 posts to their name, but of course they have been looking at this site for years. And yes, they missed out on the opportunity to buy a few years ago.

Pllleeeaaasseee.

Anyway, I'd like to suggest the following as a stock answer to these posts:-

OK, I currently rent a property for £750 per month and similar properties in the area are advertised at £180,000 (notice I said advertised, not worth).

So, I'm going to work out some figures based on this property for someone with zilch savings to their name.

If they purchase the property at £180k and pay a repayment mortgage at 6% over 25 years they would be paying £1,159 per month as opposed to £750 a month rent. Now if that house price drops 30% over the next 4 years they will be down £19,641 having overpaid for the mortgage for 48 months and this property is now worth £126,000. So in reality they have lost £73,641. If the house goes down by 40% they will have lost £91,641.

On interest only, it works out that they will be down £7,200 on overpaying a mortgage as opposed to rent meaning on 30% downturn in property prices they have made a total loss of £61,200 and on 40% drop £79,200.

A STR with dosh in the bank can also pay some/all of the rent with the interest on their savings so they are effectively living rent free.

Take for example a friend of mine. She and her husband have a property which an estate agent would value at £380,000. The have a mortgage of £80k and pay £491/month (repayment). Now if they were to sell tomorrow for £380k they would net around £280k after costs. This would provide £1400 in net interest per month which would pay for the rent of an equivalent property. So they get to live rent free, save £491 per month and watch the house prices drop. Now working on 4 years again that would mean a 30% drop saves them £137,568 and a 40% drop £175,568.

It's a no brainer really!!!!!!!

Comments please - especially all you EA's out there with your first posts! :rolleyes:

[Moderator: This thread is now pinned and any new threads started on the subject will be merged into this one]

If you believe that house prices are going to fall by 40%, why would you buy? Especially if are looking at house purchase as investment. No one would invest in an asset class they believe is most likely to fall in value of their investment holding period. However, if you are going to buy, you would a price in to your bid price the potential loss in value. Capitalise the rent at yield that incorporates potential loss in value

The value of an asset would be rent divided by Yield (or some sort of required rate of return). The required rate of return incorporates your expected growth rate. In your case you are quite pessimistic about the returns from property - so your required rate of return/yield would be quite high. This is in order to compensate for the risk of holding the asset (price falling by 40%). In short you offer price should reflect the your anticipated loss in value of the property.

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We are finding this all too much to think about at the moment, but think about it we must.

Myself and my lovely wife of 5 weeks are looking into getting a house to begin a family. We just don't want to have a baby in a flat. We want a garden and a nice little neighbourhood to start off in. Nothing wrong with that.

The problem is the timing and the rancid turd-hole of a housing market in which we find ourselves.

So many permutations and the conversation just goes round and round in circles. So I thought I'd chuck our thoughts in this thread and see what people's viewpoint was.

We have a lovely flat that we could legitimately sell for around £150K at today's prices. We're looking at anything up to £200K for a house. What we don't understand, having crunched the numbers, is how people are supposed to upgrade these days, if they want to do it (as we would term in our household) "properly" and begin a family.

If we move, and we start a family (even in a small house currently valued at £175K) that would mean a mortgage of around 6 times my current salary (it's on the up, but due to depression I had to take 4 years out of full-time career-world to straighten my brains out). A ratio of 6:1 seems to be "the norm" at the moment. How can this be the norm? And how can it continue? Together, we earn £50K. How can a family of two not be able to look at getting a house and starting a family? £50K is a handsome enough yearly income for two people and should be adequate to save (which we have), put a deposit down, start a family and allow for one of the parents to support the birth and subsequent family necessities.

It seems we are in the position where we can do one or t'other, but not both, which is a rediculous state of affairs.

We consider ourselves "normal". We don't have out-of-control debts. But the fact of the matter seems to be that because we behaved ourselves, didn't over stretch our money and didn't go self-certifying our mortgages for 8 x our salaries we are now being punished for a lot of other people's greed and chasing of fantasies.

What we're now considering is coming off the housing market all together, making a profit on our flat whilst we still can and renting on the cheap and saving even more for a year or so in the hope that house prices return to a more affordable level. Right now, I don't see how anyone can justify the totally out of proportion valuations put on property which puts most of it out of reach of almost everybody. Problems for first time buyers? Pfff. Even those on the ladder have no hope without going even further into unmanageable debt.

I guess I'm aiming this little rant at anyone below the age of 35ish. Those sitting pretty with a paid-off mortgage and a place valued at £350K + (which isn't even necessarily that nice a home for that money these days as far as the ones I've seen in SE England) are quids in even if the market crashes and they want to move.

It's all too much!

Aaaaaaaaargh!

Edited by Noallegiance
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A house does not have to increase in value to be a good investment. Once you have paid the mortgage off you never have to pay rent again. So if you can afford to do it then buying is a sensible thing to do IMO, as long as you are not banking on house price inflation to make you money and you can afford interest rate rises to a higher level (though I am not sure this will happen to be honest).

Although if prices are about to fall, why not buy next year?

We have a lovely flat that we could legitimately sell for around £150K at today's prices. We're looking at anything up to £200K for a house. What we don't understand, having crunched the numbers, is how people are supposed to upgrade these days, if they want to do it (as we would term in our household) "properly" and begin a family.

...

If we move, and we start a family (even in a small house currently valued at £175K) that would mean a mortgage of around 6 times my current salary

6x salary mortgages are not sustainable, and so I believe house prices are going to fall, and so you would be better to sell and rent or trade up next year. But this is a huge financial and lifestyle decision, so i'm wary of just wading in as an internet poster and trying to tell you what to do with your life!!

I don't own a house, and so have decided to not even look into buying one until next year so i can see what happens. If i had a house in the right location (even a too-small one) i would probably keep it if the interest rate on the mortgage was decent. But this is your flat, so your call.

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I recently put my house up for sale and it sold in 24 hours for the full asking price,which was actually more than I had expected to get as I had built £10k in to take the knock.Now I have the problem of whether to buy or sit it out to see what happens.I must admit that when I sold it two months backI tended towards the former.Since Boy George's budget I am reconsidering.

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Although if prices are about to fall, why not buy next year?

6x salary mortgages are not sustainable, and so I believe house prices are going to fall, and so you would be better to sell and rent or trade up next year. But this is a huge financial and lifestyle decision, so i'm wary of just wading in as an internet poster and trying to tell you what to do with your life!!

I don't own a house, and so have decided to not even look into buying one until next year so i can see what happens. If i had a house in the right location (even a too-small one) i would probably keep it if the interest rate on the mortgage was decent. But this is your flat, so your call.

Im in exactly the same boat as I have a house in a good location, good size, good schools, good transport links etc but when I bought the house my plan was to refurb and sell up straight away as I fear prices will drop... I currently live with the parents and dont mind remaining to do so for now. I stand to make a very healthy profit but cant decide what to do!! :blink:

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I don't know if I'm right in saying this, but surely even if house prices were 3x avg. salary (which they are not), buying now could be quite risky. Generally people will try and buy the maximum of what they can afford. If the base interest rate is 0.5% and mortgage interest is therefore historically low, when the interest rate rises, even if only by a few %, people might not be able to pay their mortgage re-payments. If house prices are greater than the 3x avg. salary figure than this problem becomes even worse.

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I don't know if I'm right in saying this, but surely even if house prices were 3x avg. salary (which they are not), buying now could be quite risky. Generally people will try and buy the maximum of what they can afford. If the base interest rate is 0.5% and mortgage interest is therefore historically low, when the interest rate rises, even if only by a few %, people might not be able to pay their mortgage re-payments. If house prices are greater than the 3x avg. salary figure than this problem becomes even worse.

yep :) Imagine all people who bought more than 4 times their salary often with 0 to 5% deposit!! Guys might want to sell..but will loose money and paid debt for several years even if house sold or get bankrupt and then banks will loose money too as the deposit is not enough to cover their ass.

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So I've placed an offer on a 2 bed Semi, it's been accepted and I wasn't expecting this. It was originally up for £90k and they've accepted £75k. The house itself needs redecorating throughout and I'd need to install a new kitchen and bathroom.

A house in the same street was sold for £111k in 2005 and some were previously sold in 2002 for £40-50k.

I have a 15% deposit and I found a mortgage (fixed at 5.49% for 3 years) that would cost less than what I pay for my rent. £75k is also 3.5x my salary.

I was just testing the water with the offer. I see today that the media might be finally turning bear and I'm now unsure what to do. :unsure:

Edited by CHR1SW
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So I've placed an offer on a 2 bed Semi, it's been accepted and I wasn't expecting this. It was originally up for £90k and they've accepted £75k. The house itself needs redecorating throughout and I'd need to install a new kitchen and bathroom.

A house in the same street was sold for £111k in 2005 and some were previously sold in 2002 for £40-50k.

I have a 15% deposit and I found a mortgage (fixed at 5.49% for 3 years) that would cost less than what I pay for my rent. £75k is also 3.5x my salary.

I was just testing the water with the offer. I see today that the media might be finally turning bear and I'm now unsure what to do. :unsure:

Like all gambling, don't do it if the grief of losing is likely to exceed the pleasure of winning. Imagine if in 3 years time you have a next door neighbour who buys for 60K, and if this wouldn't bother you in the least, then go ahead. Sounds like you're getting a good deal by today's standard, which is the only measure you can apply.

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So I've placed an offer on a 2 bed Semi, it's been accepted and I wasn't expecting this. It was originally up for £90k and they've accepted £75k. The house itself needs redecorating throughout and I'd need to install a new kitchen and bathroom.

A house in the same street was sold for £111k in 2005 and some were previously sold in 2002 for £40-50k.

I have a 15% deposit and I found a mortgage (fixed at 5.49% for 3 years) that would cost less than what I pay for my rent. £75k is also 3.5x my salary.

I was just testing the water with the offer. I see today that the media might be finally turning bear and I'm now unsure what to do. :unsure:

I'm in a similar position. I placed an offer of 98k (20k deposit) on a one bed semi, it's in good nick kitcen and bathroom wise and was offers in the region of 105 (THE HOME REPORT VALUATION).

The current owner paid 120,000 at market peak (2007) and previously (2004-5) they were selling for about 70k.

So on the one hand I was chuffed, but on the other I fully expect it to drop in value over the next few years.

I think I am going to go ahead with the following logic.

- I'm paying 5k a year rent and the place is starting to fall apart.

- Current low interest rates and small but maturing investments mean I should be able to make the maximum capital repayments over the next two years, which combined with the repayment element of the mortgage will reduce the captal to about 60k.

- it's in a quiet area with both front and (very private) rear gardens.

- there's a floored attic room for me when I have visitors.

- It may be tough seeing the depreciation - but I hope that it won't deprecite at the higher end of the percentage scale (I may be completely wrong, but I tend to expect jerry built modern 'executive' flats without any land will be hit worse?)

All of the above is, however, based on me still being in a job (I earn 35-40k but that would decrease if I was made redundant).

Edited by iamdamosuzuki
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  • 415 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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