Is it now a good time to buy a home?

[WishToBuyAFlat]

my 10%-15% deposit is now ready. Is it now a good time to buy a flat or house in London or I should wait until next year??

Before answering, consider these 2 factors in my situation:

1) Are the house prices going up or down in comparison with next year? All the articles I've read predicted that the house prices are going down.

2) Next year I can get a mortgage rate of 2% less according to a mortgage adviser I had discussed with because in 9 months time I'll be able to get my permanent residency.

Therefore about 6% now, 4% next year.

For a £200k, it would be like £12k a year interest with 6% and £8k with 4%.

The difference would be £4k (£333 per month) interest per year.

So, if the house price goes higher than this interest, it'd be financially worth purchasing it now otherwise I should be waiting another 9 months, increasing my deposit and get the mortgage next year.

What do you think? any good advise?

[Dan S]

Hi Wishtobuyaflat

The great thing is that you've clearly sat down and thought not just about all the information you've read, but you've actually done your maths too.

The answer is really quite simple...hold fire.

Why? Well you have control over how much you pay and have the ability to pay less if you wait. And like you said, the risk is that house prices will rise beyond your savings is a risk...not a certainty. If you intend to live there for a number of years then you should be more concerned about your mortgage affordability. If you intend to move fairly soon after purchasing then you need to dissect house prices on a level specific to the area of London you're intereted in.

London seems to be one of the few areas in the UK that bucked the ressession, but that doesn't meen they're not capable of dropping when interest rates rise and those on stretched mortgages get their homes repossessed. The most important thing to research in the local house prices rather than national statistics.

Where in particular are you looking to buy in London?

Dan S

[WishToBuyAFlat]

Originally Posted by Dan S

If you intend to live there for a number of years then you should be more concerned about your mortgage affordability. If you intend to move fairly soon after purchasing then you need to dissect house prices on a level specific to the area of London you're intereted in.

Thanks for your response Dan.

My intention is to stay there for a long time (e.g. 5 years or more) so wouldn't like to move quickly.

About the mortgage rate, what if I get the mortgage now with a fixed 2 years rate then re-mortgaging after 2 years when I also have my permanent residency which means after re-mortgaging I'll be able to get the lower rate. I'd guess it would be possible to do this?

So the affordability concern would be just for 2 years and I'd think I'd be fine with but yes this is another important factor.

I haven't started looking yet but around Wimbledon area perhaps.

Thanks,

[juliettelixora]

if you feel that you have a very stable job and you have a good savings deposit then what are you waiting for. Go ahead and feel free to get your own home. The earlier you can get the better since you will be able to develop your house to your full extent when you are ready to renovate, change or add something to satisfy your way of living.

[Dan S]

Hi WishToBuyAFlat

You raise some excellent points and since you say you're looking to stay there at least 5 years and are intereted in Wimbledon, it may make sense to buy now.*

As I said before, London's capital growth slowed down significantly during the recession buy it never actually stopped. Simply because it's London it doesn't mean prices can't fall, but it's certainly a safer area to invest your money that other parts of the country.*

As a side note, I would advise against a two year fixes mortgage. To really get the benefit from a fixed rate mortgage you should go for at least 3 years and preferably 5. But when interest rates rise it won't be fast, so it's more likely you'll need to fix in 2 years time rather than now.*

I wish you the best of luck. Take a look at the PROPERTY HUNTING guides here for when you're looking too.*

All the best,

Dan S

[New Homes Expert]

All crystall ball stuff!
If anyone truly knew the answers to your questions they could make a fortune spread betting on the market.

You should buy when you can afford to, at a price you feel is fair for the property you want to live in.

If you are after making money out of it then you could get burned short term.
Long term it is always the right time to buy a home.

[Dan S]

I couldn't agree more with NHE. The idea of 'timing the market' is only contingent on you worrying about selling it after living there for a short period of time. It's all very well and good buying a home a the bottom of the market and then selling at the peak, but you'll be moving yourself and so you'll be buying again, but this time at the peak of the market!

[alinaqvi90]

Originally Posted by New Homes Expert

All crystall ball stuff!
If anyone truly knew the answers to your questions they could make a fortune spread betting on the market.

You should buy when you can afford to, at a price you feel is fair for the property you want to live in.

If you are after making money out of it then you could get burned short term.
Long term it is always the right time to buy a home.

+1

Since its buyers market try to haggle a bit over the prices rather than just paying the asking price

[Dan S]

Which is especially true as most estate agents are knowingly overvaluing property in order to secure business at the moment.

[New Homes Expert]

EA overvaluing properties to get business?
Their windows are full of property they cant sell because no one is buying!
Why would they want more overpriced property on their books?