I don't know if it's relevant to you BearTricks, but I've been wondering about how long price rises will maintain out in the countryside as people escape from the cities, home working, inflating prices in more remote areas due to covid (that reason keeps cropping up in the news). I live in a small town surrounded by agricultural land and it's got me wondering if I should sell up and live in a cardboard box til they all return to the offices.
House Buying - Advice?
- Thread starter BearTricks
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Blackswanwood
Still Learning
The regulators (PRA and FCA) asked the financial services industry to ensure if it happened they could administer it earlier this year. I know this led to the media thinking this meant it was going to happen which has always been far from a certainty.
Interesting that your wife's Head Office see this as something to expect. It doesn't make them wrong of course but it is a brave statement to make.
Cheers
AlanY
Established Member
I cannot help with advice on future house prices, but I would advise you to investigate the development plan for the area you are considering moving to. Otherwise, that premium you pay for a lovely view across those fields might evaporate when the council decides to give planning permission for a developer to build 700 houses on those fields. In the South East, this seems to be happening everywhere. The village in which I live has had estates built such that there is no longer any green fields separating our village from its neighbours.
I'll give my 2c to the OP first - anyone interested in how Central Banking works can read on below 
We (2+2 household) bought a house 2 years ago after renting. Worst house in Best area. I asked my wife to list the top 5 asks in order of priority : walking distance to the sea, Near a good school, south facing garden, near shops, gas supply. My only requirement was that it would be within an hour of Dublin City centre by public transport. This really narrowed down the possible locations - especially the 'walking distance to sea' bit, which forced us to look at areas we didn't know (and frankly, never heard of). We ended up buying in a well-established 90's built cul-de-sac within 5 minutes walk of the sea, school, and Tesco.
Economically speaking the only important aspects are your personal finances; How much can you afford to borrow and at what interest rate? That will determine your upper bounds. The 'top 5' approach I adopted delimits a search area. It's just a matter of being open, viewing houses, always going back to the 'top 5' requirements.
External factors such as 'where are house prices going?' are generally speaking only relevant to investors, unless as a private buyer, you can afford to wait. Say you are paying £13k in rent per annum; if you are sure that your ideal house will be £14k cheaper next year, then sure, wait and save a grand...
Now on to Central Banking;
Central Banks influence retail interest rates by charging banks interest on their overnight deposits (US Fed does it differently). There is a margin between the Central Bank's rate and the retail banks public rates which covers the risk and opportunity costs for the retail banks. i.e. if the retail banks need a return of 5%, and the central bank rate is 3%, the public rate that banks will loan out money is 7%. Otherwise the bank won't loan and will leave excess cash on overnight deposit with the central bank.
Now at 7%, people are likely to save and unlikely to borrow. So the Central Bank, in order to keep the economy going, needs people to save less and borrow more, so they bring their interest rates down until the rates offered to Joe Public are at a place where Joe Public is happy to borrow.
Negative interest rates like now are unorthodox tools (extremely so) and are caused because banks just aren't lending because they can't get a high enough return, and/or Joe Public just isn't borrowing because consumer confidence is low or interest rates are too high.
Banks would rather pay the Central Bank negative interest rates than take the risk of losing that money in bad loans to Joe Public / Jim Industry. Bad loans leads to greater reserve requirements, and Bankers hate having to hold reserves, so better to not loan out the money than have to hold on to greater reserves.
The monetary policy is now well outside established norms so the Central Banks are hinting that the Governments need to do more from a fiscal viewpoint - start raising taxes on that, lowering taxes on this, investing here, divesting there...
One the same vein, retail banks are unlikely to start charging Joe Public negative interest rates because that would cause a run in the bank concerned. What they will do is cap deposits and charge higher fees. Same thing, different mechanism. Holders of large deposits (corporations, high net worth in individuals) excluded - they are being charged negative interest rates on cash deposits right now.
bit of an essay there so I'll stop while I'm ahead!
We (2+2 household) bought a house 2 years ago after renting. Worst house in Best area. I asked my wife to list the top 5 asks in order of priority : walking distance to the sea, Near a good school, south facing garden, near shops, gas supply. My only requirement was that it would be within an hour of Dublin City centre by public transport. This really narrowed down the possible locations - especially the 'walking distance to sea' bit, which forced us to look at areas we didn't know (and frankly, never heard of). We ended up buying in a well-established 90's built cul-de-sac within 5 minutes walk of the sea, school, and Tesco.
Economically speaking the only important aspects are your personal finances; How much can you afford to borrow and at what interest rate? That will determine your upper bounds. The 'top 5' approach I adopted delimits a search area. It's just a matter of being open, viewing houses, always going back to the 'top 5' requirements.
External factors such as 'where are house prices going?' are generally speaking only relevant to investors, unless as a private buyer, you can afford to wait. Say you are paying £13k in rent per annum; if you are sure that your ideal house will be £14k cheaper next year, then sure, wait and save a grand...
Now on to Central Banking;
Central Banks influence retail interest rates by charging banks interest on their overnight deposits (US Fed does it differently). There is a margin between the Central Bank's rate and the retail banks public rates which covers the risk and opportunity costs for the retail banks. i.e. if the retail banks need a return of 5%, and the central bank rate is 3%, the public rate that banks will loan out money is 7%. Otherwise the bank won't loan and will leave excess cash on overnight deposit with the central bank.
Now at 7%, people are likely to save and unlikely to borrow. So the Central Bank, in order to keep the economy going, needs people to save less and borrow more, so they bring their interest rates down until the rates offered to Joe Public are at a place where Joe Public is happy to borrow.
Negative interest rates like now are unorthodox tools (extremely so) and are caused because banks just aren't lending because they can't get a high enough return, and/or Joe Public just isn't borrowing because consumer confidence is low or interest rates are too high.
Banks would rather pay the Central Bank negative interest rates than take the risk of losing that money in bad loans to Joe Public / Jim Industry. Bad loans leads to greater reserve requirements, and Bankers hate having to hold reserves, so better to not loan out the money than have to hold on to greater reserves.
The monetary policy is now well outside established norms so the Central Banks are hinting that the Governments need to do more from a fiscal viewpoint - start raising taxes on that, lowering taxes on this, investing here, divesting there...
One the same vein, retail banks are unlikely to start charging Joe Public negative interest rates because that would cause a run in the bank concerned. What they will do is cap deposits and charge higher fees. Same thing, different mechanism. Holders of large deposits (corporations, high net worth in individuals) excluded - they are being charged negative interest rates on cash deposits right now.
bit of an essay there so I'll stop while I'm ahead!
Terrytpot
Established Member
The average person needs to remember just a few things…
Even though it seems expensive, your dwelling is a long term acquisition, and historically they do nothing but appreciate in value providing you use a long term view. The few lucky individuals who make a quick profit off a short term investment are not the norm and unless a truly unique opportunity presents itself you shouldn’t assume you’ll be joining their ranks. More importantly imho is the fact that if you require financial assistance to purchase a property you need to give serious consideration to how much your payments could increase when any fixed interest periods end. The current interest rates strike me as ludicrous and unsustainable and will have to at some point move and the concern has to be just how far they will when they do start to shift. Having experienced the delight of negative equity back in the 80’s and interest rates in the teens I shudder to think what that could do to someone coming out of a fixed interest period from the silly low rates we’ve enjoyed for the last decade or so.
Even though it seems expensive, your dwelling is a long term acquisition, and historically they do nothing but appreciate in value providing you use a long term view. The few lucky individuals who make a quick profit off a short term investment are not the norm and unless a truly unique opportunity presents itself you shouldn’t assume you’ll be joining their ranks. More importantly imho is the fact that if you require financial assistance to purchase a property you need to give serious consideration to how much your payments could increase when any fixed interest periods end. The current interest rates strike me as ludicrous and unsustainable and will have to at some point move and the concern has to be just how far they will when they do start to shift. Having experienced the delight of negative equity back in the 80’s and interest rates in the teens I shudder to think what that could do to someone coming out of a fixed interest period from the silly low rates we’ve enjoyed for the last decade or so.
Terry - Somerset
Established Member
Lots of sound advice already but would add a few observations:
- I am in the somewhat fortunate position of considering purchase of a buy to let flat. At the moment there is little or nothing on the market - possibly due to the holiday season, stamp duty holiday and covid impacts.
- I am hoping the market reverts to normal in a month or two. I am uncomfortable buying when things are volatile and will wait for some stability.
- buying a house to live in is usually for the long term, if for no other reason than moving is so expensive. Personally I have tended to limit the number of house moves - try to be very clear what it is you really want, need or expect from your purchase.
- no-one can tell you what will happen in the future - if they could they would be very wealthy indeed. Rents and house values may both change in the future.
- The real question is whether you buy a house needing work, and the extent to which you can diy. Not all improvements need to be done in the first year.
- if you have saved a reasonable deposit, the mortgage on a property of similar size to the one you are currently renting may be no higher than the rental (possibly less)
- a fixed rate mortgage for at least 3 years can be a good idea as it protects you from uaffordable increases. You may lose out if interest rates fall further - although in my view this is unlikely. A better safe than sorry approach!
heimlaga
Established Member
My advice is to think through very thoroughly what you and your family want and need both now and in the long term.
It is easy to get lured into thinking that you want exactly what everybody else want and then go hunting for what everybody else hunts for and then pay way too much to get it.
It is also easy to forget that life situations tend to change and having a huge mortagage on a large house on a very small plot of land may become akin to owning a white elephant if anything changes. Sometimes it is way better to have a smaller house and enough land to build a workshop and a few sheds and have a kitchen garden. Shed space is cheaper per cubic metre than heated living space so therefore it is often a good idea to have a small house large enough for living but not for storing stuff plus some cheap outbuildings for storing stuff plus outbuildings can be used for some sort of small business or side income if times change. The more versatility the better!
It is easy to get lured into thinking that you want exactly what everybody else want and then go hunting for what everybody else hunts for and then pay way too much to get it.
It is also easy to forget that life situations tend to change and having a huge mortagage on a large house on a very small plot of land may become akin to owning a white elephant if anything changes. Sometimes it is way better to have a smaller house and enough land to build a workshop and a few sheds and have a kitchen garden. Shed space is cheaper per cubic metre than heated living space so therefore it is often a good idea to have a small house large enough for living but not for storing stuff plus some cheap outbuildings for storing stuff plus outbuildings can be used for some sort of small business or side income if times change. The more versatility the better!
Two things that matter in this decision is how safe your job seems and how much equity you will have, I have always been in the fortunate position of being able to buy while borrowing a bit less than the maximum I would have been allowed. Then if it's at all possible making the odd over payment. With my first house that meant almost no furniture, I used a large cardboard box as a table for over a year but hammered the hell out of the mortgage, glad I did when things turned south we had interest rates go 8% to 10% to 12% then back to 10% in one day. Having a bit of credit with the building society saved my bacon.
You only get one life, if you are living somewhere you don't feel happy unless it's a reckless risk I would say move, be realistic, don't stretch your finances too far. As long as you can keep paying that mortgage unless you have to move the current price don't matter and once you have some equity behind you as others have said falling prices close the gap if you want to move up and rising prices increase the percentage of the house you own.
Good luck, and whatever choice you make be happy with it
You only get one life, if you are living somewhere you don't feel happy unless it's a reckless risk I would say move, be realistic, don't stretch your finances too far. As long as you can keep paying that mortgage unless you have to move the current price don't matter and once you have some equity behind you as others have said falling prices close the gap if you want to move up and rising prices increase the percentage of the house you own.
Good luck, and whatever choice you make be happy with it
No expert by any means but the best piece of advice i have ever been given re houses is your better to have the worst house on a nice street than the best on the worst. A friend of mine has a small homebuilding company and he is still looking to buy land now if that helps. He also said i think its the nationwide is offering a 5 yr fixed mortgage at 1.19%. I have always listened to him and his point is as above and the worst house can always be tarted up to be in line with the street
starlingwood
Established Member
You just need to get on the ladder. It's crap I know but I cant see anything on the immediate horizon that will rock the economy and if a global pandemic didn't then whats it got to take.
If you get on and there is a crash so will all other places too which can work to advantaged if you're moving up the ladder. Just got to do it. Do not flitter money away on rent.
If you get on and there is a crash so will all other places too which can work to advantaged if you're moving up the ladder. Just got to do it. Do not flitter money away on rent.
I feel that the belief that money is wasted on rent isn't especially valid. While I don't rent myself, but have done on occasions, a mortgage isn't the holy grail that many people think it is.
If you rent, you pay somebody each month for the flexibility to live in a place, generally free of risk, for an agreed period of time.
If you fund a mortgage, especially in the early stages, you pay a lender an amount of money each month to fund, almost totally, the interest on a debt and administration and their shareholder return. Very little of it pays against capital - with some mortgages, none of it ever does. You own a portion of the property but the lender generally retains ultimate control over the property. You do get a stake in the financial gain if the property appreciates in value but, you are also exposed to the risk if it drops with the lender having a more limited risk than you do.
My son and his girl friend were considering buying having just graduated from university and starting new jobs. I suggested that they rent for a while during which they could establish themselves workwise, decide what they wanted in a purchased property, save as much as they could and accumulate a decent deposit. Then, when more sure of what they want and how they are, buy more at leisure, probably with a better interest rate and more immunity from price fluctuation.
I'm not saying that anybody should rent forever, quite the opposite, but rental money, in my opinion, isn't burning money in the way that many people think it is.
If you rent, you pay somebody each month for the flexibility to live in a place, generally free of risk, for an agreed period of time.
If you fund a mortgage, especially in the early stages, you pay a lender an amount of money each month to fund, almost totally, the interest on a debt and administration and their shareholder return. Very little of it pays against capital - with some mortgages, none of it ever does. You own a portion of the property but the lender generally retains ultimate control over the property. You do get a stake in the financial gain if the property appreciates in value but, you are also exposed to the risk if it drops with the lender having a more limited risk than you do.
My son and his girl friend were considering buying having just graduated from university and starting new jobs. I suggested that they rent for a while during which they could establish themselves workwise, decide what they wanted in a purchased property, save as much as they could and accumulate a decent deposit. Then, when more sure of what they want and how they are, buy more at leisure, probably with a better interest rate and more immunity from price fluctuation.
I'm not saying that anybody should rent forever, quite the opposite, but rental money, in my opinion, isn't burning money in the way that many people think it is.
We are a society of people who are afraid to move homes out of the areas we were brought up in or commute for work.
This fear or dependency needs to change if people are expecting value for money in the property market.
A city is just that. Most types of job positions are stereotype all over the country with excellent home prices.
On renting.
Well if you get used to any spare money you invariably will spend it on other things and maybe never get out of this chain.
But the main point is this.
Whatever you buy should be your home. Somewhere if you want kids you can happily bring them up there.
But Not a vehicle to remortgage your summer holiday with.
Just my thoughts you understand.
This fear or dependency needs to change if people are expecting value for money in the property market.
A city is just that. Most types of job positions are stereotype all over the country with excellent home prices.
On renting.
Well if you get used to any spare money you invariably will spend it on other things and maybe never get out of this chain.
But the main point is this.
Whatever you buy should be your home. Somewhere if you want kids you can happily bring them up there.
But Not a vehicle to remortgage your summer holiday with.
Just my thoughts you understand.
Short answer:
Get on the ladder. You need a roof over your head. It doesn't really matter how much the property is worth in the short term. Negative equity is only a problem when you sell.
Building equity only really matters if your plan is to eventually downsize and release money to help fund retirement or to be mortgage free.
Best street thing is a safe bet but certainly here in London you can get more by picking the next hotspot before it takes off.
Good areas are always expensive. Up and coming areas have more scope for bigger profits, or getting more for your money.
Try to get a house that will meet your future space requirements, or with scope to extend. In a rising market it quickly becomes impossible to move up the ladder in the same area.
Make sure you have enough headroom to fund a hike in interest rates.
Now the rambling bit:
Overpaying whilst mortgage rates are low isn't always the best option. Pay more into your pension instead. You'll get tax relief and maximise employer contributions.
You can use tax free lump sum in retirement to pay off mortgage.
If interest rate rises reduce pension contributions to cover increase in mortgage.
Met my (final) wife in 1987 after divorce. Bought her flat and rented it out whilst we moved to another house together. Prices crashed but just waited until they recovered and the (then non paying) tenant was evicted. Came out with small profit. Put me off BTL for life. Should have stuck with it. Cheaper areas of London have rocketed over the years.
Wife took redundancy after first child born. Used money to move to much nicer area.
Should have rented that house out too!
Bought smallest house on one of the best streets. Now Aston Martins and Porsches down the other end of the street whilst I've kept my battered 2004 CR-V
Been here 28 years. Extended and improved. Now an empty nest and I've retired. Neighbouring areas have shot up by bigger percentage
Actively looking to move to Suffolk.
Surprised and pleased with our valuation. House will sell very quickly.
Problem is the market for our target areas and property type is just as bonkers as where we are now. Multiple offers over asking price for properties we like and sold within 1-2 weeks.
Bloody WFH Johnnies have over heated the market out in the sticks.
Get on the ladder. You need a roof over your head. It doesn't really matter how much the property is worth in the short term. Negative equity is only a problem when you sell.
Building equity only really matters if your plan is to eventually downsize and release money to help fund retirement or to be mortgage free.
Best street thing is a safe bet but certainly here in London you can get more by picking the next hotspot before it takes off.
Good areas are always expensive. Up and coming areas have more scope for bigger profits, or getting more for your money.
Try to get a house that will meet your future space requirements, or with scope to extend. In a rising market it quickly becomes impossible to move up the ladder in the same area.
Make sure you have enough headroom to fund a hike in interest rates.
Now the rambling bit:
Overpaying whilst mortgage rates are low isn't always the best option. Pay more into your pension instead. You'll get tax relief and maximise employer contributions.
You can use tax free lump sum in retirement to pay off mortgage.
If interest rate rises reduce pension contributions to cover increase in mortgage.
Met my (final) wife in 1987 after divorce. Bought her flat and rented it out whilst we moved to another house together. Prices crashed but just waited until they recovered and the (then non paying) tenant was evicted. Came out with small profit. Put me off BTL for life. Should have stuck with it. Cheaper areas of London have rocketed over the years.
Wife took redundancy after first child born. Used money to move to much nicer area.
Should have rented that house out too!
Bought smallest house on one of the best streets. Now Aston Martins and Porsches down the other end of the street whilst I've kept my battered 2004 CR-V
Been here 28 years. Extended and improved. Now an empty nest and I've retired. Neighbouring areas have shot up by bigger percentage
Actively looking to move to Suffolk.
Surprised and pleased with our valuation. House will sell very quickly.
Problem is the market for our target areas and property type is just as bonkers as where we are now. Multiple offers over asking price for properties we like and sold within 1-2 weeks.
Bloody WFH Johnnies have over heated the market out in the sticks.
Short answer:
Get on the ladder. You need a roof over your head. It doesn't really matter how much the property is worth in the short term. Negative equity is only a problem when you sell.
Building equity only really matters if your plan is to eventually downsize and release money to help fund retirement or to be mortgage free.
Best street thing is a safe bet but certainly here in London you can get more by picking the next hotspot before it takes off.
Good areas are always expensive. Up and coming areas have more scope for bigger profits, or getting more for your money.
Try to get a house that will meet your future space requirements, or with scope to extend. In a rising market it quickly becomes impossible to move up the ladder in the same area.
Make sure you have enough headroom to fund a hike in interest rates.
Now the rambling bit:
Overpaying whilst mortgage rates are low isn't always the best option. Pay more into your pension instead. You'll get tax relief and maximise employer contributions.
You can use tax free lump sum in retirement to pay off mortgage.
If interest rate rises reduce pension contributions to cover increase in mortgage.
Met my (final) wife in 1987 after divorce. Bought her flat and rented it out whilst we moved to another house together. Prices crashed but just waited until they recovered and the (then non paying) tenant was evicted. Came out with small profit. Put me off BTL for life. Should have stuck with it. Cheaper areas of London have rocketed over the years.
Wife took redundancy after first child born. Used money to move to much nicer area.
Should have rented that house out too!
Bought smallest house on one of the best streets. Now Aston Martins and Porsches down the other end of the street whilst I've kept my battered 2004 CR-V
Been here 28 years. Extended and improved. Now an empty nest and I've retired. Neighbouring areas have shot up by bigger percentage
Actively looking to move to Suffolk.
Surprised and pleased with our valuation. House will sell very quickly.
Problem is the market for our target areas and property type is just as bonkers as where we are now. Multiple offers over asking price for properties we like and sold within 1-2 weeks.
Bloody WFH Johnnies have over heated the market out in the sticks.
Where in Suffolk? We are currently looking in Suffolk and it's nuts. People buying houses without a viewing a couple of hours after it's gone on rightmove! Had several offers that we have placed over the asking price beaten by people offering more.
We are fairly flexible but probably the same places everyone is clamouring for.
Ideally near Suffolk coast from Woodbridge up to Southwold and across to Halesworth, Framlingham.
Pretty much ruled out Beccles and Saxmundham and anywhere too remote or sitting on the A12. Not actually in Southwold and Aldeburgh too expensive/busy.
We've only just had our place valued so haven't done any viewings yet. We've called agents about specific properties and as you say it's completely crazy, places under multiple offers within days. Prices in Suffolk and Norfolk rising faster then London.
Agents are being pretty lazy in my opinion. The presentation on Rightmove is often poor. Not enough useful photo's and details. They should do a far better marketing job for a couple of weeks, then hold an open day and invite best and final offers. They shouldn't accept offers from people who haven't viewed and haven't been properly vetted. It'll lead to buyers dropping out. No doubt people will have an offer accepted and still keep looking.
Unless you're a cash buyer the inflated prices will get knocked back by the mortgage lender when they do their valuation.
We're not under any pressure to move other than golden years of retirement slipping away. Might have to wait and see if the market calms down.
Lovely area you are looking.
I grew up in Aldeburgh.
Have you considered a Barge on the Deben?
Sheptonphil
Scrumpy junkie
One piece of advice I have always adhered to when buying a house (I’m on my 11th house) “better to buy the worst house in the best street, than the best house in the worst street”.
whatever your reservations, just buy, you’ll always realise your nett outlay when all is taken into account. Don’t keep making offers, someone is going to pay the asking price, make sure it’s you.
whatever your reservations, just buy, you’ll always realise your nett outlay when all is taken into account. Don’t keep making offers, someone is going to pay the asking price, make sure it’s you.
BearTricks
Established Member
Thanks for the advice everyone.
That's right. I should have been more clear. We were renting previously and offered to move in to an empty property owned by one of my parents a few years ago. The logic being that I'll eventually get at least some of those rent payments back at some point down the line.
We have actually had an offer accepted as of today. Our deposit is healthy so we're not actually lending an amount that I feel uncomfortable about. The property needs some work but it's liveable while we get the jobs done assuming we don't hit any stumbling blocks before getting the keys.
That's right. I should have been more clear. We were renting previously and offered to move in to an empty property owned by one of my parents a few years ago. The logic being that I'll eventually get at least some of those rent payments back at some point down the line.
We have actually had an offer accepted as of today. Our deposit is healthy so we're not actually lending an amount that I feel uncomfortable about. The property needs some work but it's liveable while we get the jobs done assuming we don't hit any stumbling blocks before getting the keys.
The most important thing about your pile of bricks is that it is your home, think like that and it's value is irrelevant and so get on and enjoy living there. Given my time again and if I was late twenties / early thirties now I would without hesitation be getting out of England, it is just becoming an over crowded over developed sespit, only those of a certain age can appreciate how nice it was.
