House prices .. Buy now or wait?

Is there something wrong with this house? you're paying ~3 thousand a year, interest only on a 100,000 mortgage will be getting on for double that

I really don't think you'd be sensible to increase your costs considerably for little benefit other than owning a house, take the thousands of pounds a year you're saving by not paying that mortgage and save it up for a deposit.

Whilst the future direction of house prices is a contentious issue, there's very few people who believe it will go up particularly, and there's a strong belief that prices will come down considerably.

Jim.

Some years ago I was told by a professional valuer that (as a rough rule-of-thumb) the value of a house was around ten times the annual rent it should fetch.

On this basis you should be paying nearly 200 pounds a week in rent, so you seem to be sitting pretty as you are.

Lucky people! I'm paying 120 quid per week on 22k :-(

cd

maybe, but the rates and other "fees" make it a bit more expensive to do so.

b) how much would a mortgage of that size

and c) Is buying a house at this time worth it? Is the

if we knew that we could make a fortune :-)

Phil

Probably. But if you have no savings you'd need more than 100% as you'd have the transactions costs to pay (stamp duty, surveys, solicitors etc). You're probably looking at around 2000 for these.

A 25 year repayment at Nationwide's BMR 5.99% would be 149 per week. You could probably get a better short term rate which might knock a tenner or so off. Even so you're talking well over double what you're paying now.

Plus there'll be insurance and maintenance costs on top, something often forgotton when comparing renting with buying. Typically allow 2% of the house prices pa for I&M (ie 38 per week) although this will vary greatly with type of house etc and how lucky you are.

Not if you can rent for a third of the price of a mortgage plus I&M! A few years ago you'd almost certainly save money by buying rather than renting, these days renting is often cheaper.

Possibly. I don't think too many people are predicting continuing double figure rises. Some say prices will stay flat for a few years. But it's all guesswork anyway. To me common sense says that prices can't rise faster than earnings in the long term, although they could stabilise at a higher multiple of earnings.

Getting a 100% mortgage in the current climate with no savings when you could be renting for a third of the price would seem crazy. If prices were to fall, even slightly, and you lost your job, you'd be in the dreaded position of negative equity and being unable to pay the mortgage.

You don't get any state help for 9 months, and even then it's only mortgage interest, not repayments, I&M costs etc so you could have a problem if your roof or pipes start leaking or your boiler blows up. OTOH if you were renting you should get housing benefit to pay your rent which would include such costs, and without a 9 month wait.

Quite. And if with repayments, maintenance, and insurance it'd be nearly £180pw, and if we assume for a moment that you could afford that, but are in fact only paying £60pw now, this means you must have £120pw to spare just now. There is a question begging to be asked here: In that case, how come you have no savings? What have you been blowing £120pw on? You'd have to be doing without that!

Stay where you are and start saving.

"Andy Pandy" wrote

That sounded a bit high to me, so I've just looked into it a little closer :-

My current house (generous buildings & contents) insurance costs close to

That leaves 1.9% of the 2% for "maintenance". Taking account of the fact that rebuilding costs are around half of house cost (for me at least), then that's around 3.8% of rebuilding costs each and every year - enough to rebuild the *entire* house (including demolition of any remains) every 26.3 years.

I certainly hope the house would last a *lot* longer than just 26 years!! Assuming this is the case, 2% is far too high an allowance for insurance & maintenance.

If more people used this quick calculation there would be no buy-to-let boom ;-). It's mostly used by the pros who got in years ago as it works out at a 10% yield. Current nationwide average yields are around 5% if the letting agents are to be believed.

Daytona

I've seen estimates putting it 3-4%! These were probably based on prices before the silly rises over the last few years so I lowered it a bit.

Mine's probably about 0.25%

That'll vary a lot with type of property, for instance terrace houses often have a higher rebuild cost than the property value.

I don't think the rebuild cost is particularly relevant to ongoing maintenance. There again nor is the purchase price, it's only a very rough and ready estimate. In any case, there are many expensive elements of the house which would need to be replaced more often than every 26 years, like the boiler and windows plus things like the roof are unlikely to go so long without need expensive attention.

Also if you're comparing with renting a furnished place you'd need to account for carpets and furniture etc (which wouldn't be included in the rebuild cost). Not to mention garden fences, tree pruning etc (which has been my biggest maintenance cost this year). Plus sewer blockages can be expensive, again not included in the rebuild cost.

Heaven knows why anyone bothers with a 5% investment with all the hassle that letting involves. I can't help feeling that a lot of BTL investors will grow weary and quite the sector over time.

Because it excludes the capital gain, and these investors just know that they're going to get 16%pa and double their money every 5 years indefinitely ;-)

First they'll need to get a clue. There's precious little evidence of that so far

Daytona

The only thing wrong with the house is that its an ex council, housing association house. My wife feels a lot of shame beacuse we still live in a "council" house and my parents are always telling me that rent is dead money and urging me to buy.

I try to explain this to my wife, but she wants to be "like everybody else" and be a homeowner

We dont blow 120 a week on anything! I wish!!!!

So renting is a lot cheaper than buying.

Possibly, if you look around

Interest only would be about £125 per week. If you want the mortgage to be paid off at some point in the future, you would have to pay more.

On these figures, no.

Some people think so.

Continue renting, and build up some savings.

Mortgage interest is dead money as well, and in this case, it is going to be a lot more than the rent.

In your case, you would be better off saving up, having £100k in the bank and using the interest you earn on it to pay the rent than you would be to buy the house.

Especially when you can get 5% on ING Direct or Nationwide e-savings pretty much risk free.

Not only a lot more money, but also a lot more dead, because if you use a 100% interest-only loan to buy a £100k house, in a couple of years you might end up paying interest on a £100k of debt in order to be be living in a house worth only £80k.

There's your answer, then. If you can't afford (or don't have) £120 a week to blow on fripperies, and aren't building up savings, where are you going to find £120pw to add to your £60pw rent to afford a £180pw mortgage?

Having seen some the US$5,000,000 Poker prizes, I am considering a change of career. :)