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MLDK

3 Year Tracker @ 6.69% Vs. 5 Year Fixed At 6.99%

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Hey all. I'm considering a shared ownership purchase of my first flat and have two mortgage options available to me, found via London and County and another broker.

1. Woolwich 3 year tracker @ Base rate + 1.69% = 6.69%. No arrangement fees, £375 valuation fee.

or

2. 5 year fixed at 6.99%. Fees to be confirmed.

Quick question really. I was originally after a fixed rate just to make budgeting easier, but over the next three years, do you think I'm better off going with the tracker rate? It's "only" a £70,500 mortgage so the swings in monthly payments shouldn't be too great. I'm reading everything I can to help make a decision, but I'd also like to know what the minds on the forum think about my options. Do you think in the long run i.e. the next three to five years, the base interest rate will be higher or lower than it is now? And yes, I know that is the million dollar/pound question we'd all like to know the answer to :lol: .

Thanks everyone.

Edited by MLDK

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You do realise you're going to get 100 abusive posts telling you not to be so stupid as to buy now; and another fifty accusing you of being a troll...

FWIW, if you REALLY want to throw away your money on a depreciating asset (just read today's FT article, I'm sure somebody will point you in the right direction), then were it me, I would go with the fixed. You know you can afford it; if rates halve, you know you can still afford 6.99%; if they double you know you can still afford 6.99% but you would be STUFFED, big time, with 14%.

Another point, is that if prices do drop 50% over the next 4 or 5 years, you will be left with something completely unsaleable - who would want to buy 50% of a flat when they can buy 100%? Shared ownership schemes will be dead if that happens.

Who knows?

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Are you sure it is a good time to buy, just as the crash is picking up pace? Personally, I'm waiting until the prices stop falling before I buy. I'm going to wait. No point in throwing money away buying a property now.

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I see you have indeed taken the plunge, and signed up to this forum. Well done. Should you have taken this action, even a few months ago, I doubt that you would be taking on a mortgage at this point in time. A lot of people on this forum have been saying "don`t do it !" for quite a while. Now the crash has started, there`s even more reason to hold fire on buying your own place.

I suppose that there are circumstances where buying a place to like might not be as crazy as it sounds, but if you base the decision of buy, or not to buy on pure economics, there`s only one answer at the moment.

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Thanks for the reply, and no one needs to fear, there is no troll here :) . I understand the points made about the decreasing value of property, but I can actually pay less (£250 a month less) and get more property than if I rent, via the scheme I am on as a key worker.

Assuming I am willing to take the risk of buying at this time, is there a general consensus on the future of the base interest rate? Or is it too volatile to predict and a fixed rate mortgage is the best option?

Edit: Well it looks like that's already been answered. There's some strong emotion on here, that's for sure. I'll review my options again and see what's what.

Cheers

Edited by MLDK

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Thanks for the reply, and no one needs to fear, there is no troll here :) . I understand the points made about the decreasing value of property, but I can actually pay less (£250 a month less) and get more property than if I rent, via the scheme I am on as a key worker.

Assuming I am willing to take the risk of buying at this time, is there a general consensus on the future of the base interest rate? Or is it too volatile to predict and a fixed rate mortgage is the best option?

It is impossible to predict, which means there is no such thing as a "best option", but if I were on your shoes (thank God I'm not) I'd probably go for a fixed rate.

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Thanks for the reply, and no one needs to fear, there is no troll here :) . I understand the points made about the decreasing value of property, but I can actually pay less (£250 a month less) and get more property than if I rent, via the scheme I am on as a key worker.

Assuming I am willing to take the risk of buying at this time, is there a general consensus on the future of the base interest rate? Or is it too volatile to predict and a fixed rate mortgage is the best option?

There is no consensus on interest rates, I personally thinkg the next move will be down. Whatever happs to inflation, I really cant see the BoE / Govt raising rates aggressivly given how much debt they and the entire population is in, regardless of whether this is in hte best long term interests of the country or not. There is also some truth in the argument that raising interest rates will not reduce inflation as this is mainly due to increases in commodity prices. It is for these reasons that I opted for a tracker mortgage when I bought last year. I have not looked at the rates available now, but the rates you are quoting do sound very high indeed, do you have a poor loan to value? Also, given the current rate of decline in house prices, you stand to lose significantly more than £250 a month by buying now even though the "cash out the door" might be less. We are hearing lots of anecdotals about the cost of renting going down, so it might be that you could save a few quid by shopping around there aswell. You also need to factor in agent fees and HIPS costs etc when you sell. Sounds like you might not have factored in maintenance costs & service charge either.

Still think this could be a wind up though. It sounds like you cant really afford to buy a house, so I suggest you dont try as you will end up with load of hassle and even less money / more debt.

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There is no consensus on interest rates, I personally thinkg the next move will be down. Whatever happs to inflation, I really cant see the BoE / Govt raising rates aggressivly given how much debt they and the entire population is in, regardless of whether this is in hte best long term interests of the country or not. There is also some truth in the argument that raising interest rates will not reduce inflation as this is mainly due to increases in commodity prices. It is for these reasons that I opted for a tracker mortgage when I bought last year. I have not looked at the rates available now, but the rates you are quoting do sound very high indeed, do you have a poor loan to value? Also, given the current rate of decline in house prices, you stand to lose significantly more than £250 a month by buying now even though the "cash out the door" might be less. We are hearing lots of anecdotals about the cost of renting going down, so it might be that you could save a few quid by shopping around there aswell. You also need to factor in agent fees and HIPS costs etc when you sell. Sounds like you might not have factored in maintenance costs & service charge either.

Still think this could be a wind up though. It sounds like you cant really afford to buy a house, so I suggest you dont try as you will end up with load of hassle and even less money / more debt.

Cheers worzel, that the helpful kind of answer I was looking for. I had previously thought a £15,000 per year drop in value unlikely, but perhaps not!

Regarding LTV, it's a 30% purchase of 235k flat. That value is 3 months old tho, and due to the scheme the property can only be sold at the current market value, which will be decided by a valuation. I can afford the payments etc. comfortably, the only issue to consider is potential decreases in the value over the next 5 years or so, and the risk of negative equity.

With everything you said in mind, what made you decide to buy vs rent?

Edited by MLDK

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Thanks for the reply, and no one needs to fear, there is no troll here :) . I understand the points made about the decreasing value of property, but I can actually pay less (£250 a month less) and get more property than if I rent, via the scheme I am on as a key worker.

Assuming I am willing to take the risk of buying at this time, is there a general consensus on the future of the base interest rate? Or is it too volatile to predict and a fixed rate mortgage is the best option?

Edit: Well it looks like that's already been answered. There's some strong emotion on here, that's for sure. I'll review my options again and see what's what.

Cheers

Ohh great so you pay less not but more later? Is your new mortgage+rent less than it would be to pay social housing rent? Part buy schemes are essentially modern social housing, don't compare part buy to normal renting compare it to council flat rents. The people in the next door flats will probably be on benefits and be paying social housing rent.

Woolwich were 5.1% 2 years ago and BOE interest rates were no different today, its the markets not the BOE you want! As for predicting LIBOR market, the markets are pricing in lower IRs but dont take that as advice!

a 235k flat, why dont you get yourself down a property auction and buy 100% for less than half that, or look for struggling sellers and offer low prices? are you paying the 'full asking' in todays market it is normal to offer 25-40% less than the asking? and finally why have you suddenly decided to buy now? Why not years ago? why not wait 6-12 months and re-assess?

I had previously thought a £15,000 per year drop in value unlikely

According to Halifax prices have already fallen 11%, ie the price of your flat has already dropped 25k in 7 months. Today prices have fallen more than double what you throught was possible! can you 'save' 25k in 7 months from your salary, because you have by staying out of the market.....

Edited by moosetea

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Save £250 per month...

But lose 70k capital over 5 years. That's £1,166 per month.

So buying will in effect cost you an extra £866 per month. Ouch.

Actually, I guess you'll only lose 35k capital - which is £583 per month. But at the end you'll end up with a part-flat worth 35k that you cannot sell, so you lose that too, plus you have to carry on paying rent on the portion you don't own.

And I'm a lot more bullish than many posters round here...

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Cheers worzel, that the helpful kind of answer I was looking for. I had previously thought a £15,000 per year drop in value unlikely, but perhaps not!

What made you decide to buy vs rent?

I am approaching 30, and really wanted to live somewhere with a garden that we could make our own etc. We had a big deposit, and bought somewhere well within our budget (mortgage of 1.5x joint earnings) so we can weather the storm of interest rates and can make significant overpayments to make a dent in the mortgage. I know we will have already lost money, and saw this coming, which is why we went for somewhere relatively cheap so any falls in value would be bearable.

Why is £15,000 the magic number? You are only "saving" £250 per month on your calculations, which equates to just £3000.

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Hey all. I'm considering a shared ownership purchase of my first flat and have two mortgage options available to me, found via London and County and another broker.

1. Woolwich 3 year tracker @ Base rate + 1.69% = 6.69%. No arrangement fees, £375 valuation fee.

or

2. 5 year fixed at 6.99%. Fees to be confirmed.

Quick question really. I was originally after a fixed rate just to make budgeting easier, but over the next three years, do you think I'm better off going with the tracker rate? It's "only" a £70,500 mortgage so the swings in monthly payments shouldn't be too great. I'm reading everything I can to help make a decision, but I'd also like to know what the minds on the forum think about my options. Do you think in the long run i.e. the next three to five years, the base interest rate will be higher or lower than it is now? And yes, I know that is the million dollar/pound question we'd all like to know the answer to :lol: .

Thanks everyone.

Oh dear.

Where is this flat and what % share are you 'buying'?

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Hey all. I'm considering a shared ownership purchase of my first flat
Regarding LTV, it's a 30% purchase of 235k flat

How about wait for 3 years and buy the flat outright for 70,000?

Nothing in this life is guarranteed, but to buy a flat in a market that has fallen 10% in one year after increasing 160% in 10 years, should be enough to start ringing some alarm bells that prices will fall further.

People who bought at the peak of the last crash were in negative equity in real terms (including inflation) for nearly 10 years.

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Thanks for the reply, and no one needs to fear, there is no troll here :) . I understand the points made about the decreasing value of property, but I can actually pay less (£250 a month less) and get more property than if I rent, via the scheme I am on as a key worker.

Assuming I am willing to take the risk of buying at this time, is there a general consensus on the future of the base interest rate? Or is it too volatile to predict and a fixed rate mortgage is the best option?

Edit: Well it looks like that's already been answered. There's some strong emotion on here, that's for sure. I'll review my options again and see what's what.

Cheers

Do yourself a favour and wait a couple of years.

Why should you only be able to afford to buy a share of a place? Are you at the bottom of the food chain earning £2 an hour as an illegal immigrant car cleaner?

Given you are a key worker, don't you feel you should be able to buy a place to live at some point?

Withoug wishing to be offensive, people like you make me despair for the future of this country. You're like a lemming or lap-dog begging to please. Please, please let me be able to buy half a flat. I know I'm not worthy of a whole flat.

Two of my nieces have bought shared ownership flats - against my advice - in the last two years. They are already regretting it. They thought the market would go up and that their little bit of equity would grow - which would be better than having no equity growing.

I couldn't get them to see that the more people bought into shared ownership, the more it guaranteed they would never own their own home.

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Guest Daddy Bear

Another punter joins the queue to be CASHSTRATED*

* "cashtration:" the act of buying a house which renders the subject financially impotent for an indefinite period of time".

Seriously the only sensible advice I can give you is point you to this excellent community of like minded people.

db

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  • 395 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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