Should've bought a couple of months ago?

BurnsCarpenter

I know everyone was saying you'd be crazy to buy.
But given that banks are withdrawing all of the attractive interest rate options - should I have bought two months ago? At least house prices will recover and grow, but those buying in the next few years will probably have much worse tracker rates (maybe +1.3% instead of +0.8%) for years to come.

johnnyskeleton

BurnsCarpenter wrote: »

I know everyone was saying you'd be crazy to buy.
But given that banks are withdrawing all of the attractive interest rate options - should I have bought two months ago? At least house prices will recover and grow, but those buying in the next few years will probably have much worse tracker rates (maybe +1.3% instead of +0.8%) for years to come.

When you're talking about .5% difference in interest (€30 extra per 100k per month) you should put that into balance with the possible loss you might have suffered in buying property (maybe hundreds of thousands).

However, if the property drops by 9% you would pay the same amount of interest i.e. 5.05% interest on €100,000 is €5050; 5.55% interest on €91,000 is €5050.50

So look at a property that you would have bought 2 months ago. If the price of the property goes down by 9% (this is a conservative estimate) this year, you will be paying the same amount of money on the interest bill. But the really clever part is that you have €9,000 less to repay to the bank. This means you can pay the loan back faster and pay even less interest. It also means that you are in much less debt than you would have been in had you bought 2 months earlier.

AARRRGH

BurnsCarpenter wrote: »

those buying in the next few years will probably have much worse tracker rates (maybe +1.3% instead of +0.8%) for years to come.

If you bought a few months ago you'd also be hit will all the interest rate rises, right?

I think its likely house prices will continue to drop for a few years. Keep saving until you have a large deposit.

Glenbhoy

BurnsCarpenter wrote: »

I know everyone was saying you'd be crazy to buy.
But given that banks are withdrawing all of the attractive interest rate options - should I have bought two months ago? At least house prices will recover and grow, but those buying in the next few years will probably have much worse tracker rates (maybe +1.3% instead of +0.8%) for years to come.

If the market picks up slightly it'll be partly because the credit crunch has eased (imo it'll be well after the cc eases, well there might be a slight bounce initially), thus banks will be falling over each other again to give out 'great' deals.

BurnsCarpenter

dublindude wrote: »

If you bought a few months ago you'd also be hit will all the interest rate rises, right?

I meant that the actual mortgage products have changed in the last month or so. It's nearly 0.5% more onto the ECB rate than it was, and will probably get worse. Good chance trackers will disappear altogether.

johnnyskeleton

The way I see it, there will be double digit price drops this year and in 2009, with single digit drops in 2010. After that, house prices will still be over inflated but people will stop dropping prices and house prices stagnate. However, inflation will keep going up, wages will keep going up, so €200,000 in 2010 will be worth a lot less in 2015 in real terms. It obviously makes no sense to buy when house prices are dropping, even if they are only dropping by 1%, and anyone who buys over the next few years while they are still dropping has more money(or debt) than sense. The difficult question is whether to buy when house prices are stagnant as this is largely a question of whether you would prefer to own or rent and what the particular trade off is in your circumstances.

In the meantime, why not keep track of a house that you would have bought 2 months ago, work out how much interest you would pay per month, and keep an eye out for drops in the property/similar properties. Whatever the difference is, consider this your profit from short selling of property.

gurramok

And consider that every buyer is in the same boat with the reduced amounts they can borrow and prices will fall and have fallen to reflect that.

Cantab.

BurnsCarpenter wrote: »

I meant that the actual mortgage products have changed in the last month or so. It's nearly 0.5% more onto the ECB rate than it was, and will probably get worse. Good chance trackers will disappear altogether.

Do you even know how a tracker rate mortgage works?

BurnsCarpenter

Cantab. wrote: »

Do you even know how a tracker rate mortgage works?

Maybe I didn't make myself clear.

A couple of months ago a bank might have offered ECB + 0.8, now they have raised the amount over the ECB they will charge, and it will probably get higher. Now you're looking at ECB + 1.35.
I'm obviously not talking about the ECB rate itself rising - that's going to affect everyone.

chump

Cantab. wrote: »

Do you even know how a tracker rate mortgage works?

Cantab I think what he is saying is correct.

I believe banks aren't really too keen on giving mortgages out at all at the min, and so have increased their MARGIN.

ie. ECB + 0.8% as opposed to ECB + 1.2%

It's likely because they money market rate has been higher than the ECB rate for some time.

Anyway BurnsCarpenter, I'd agree with the guys above, good call to wait. But if do dip in now, the chances are you can refinance in a few years and get a better deal anyway, so for the first few years hopefully it wouldn't make too much of a difference (plus the savings on missing the bubble peak)

ixoy

But if you bought say a year ago, and secured a better mortgage rate (as such), won't there be a time in the near future when you'll have to re-negotiate with your bank and be landed a (poorer) new deal? Won't any gains you got with a slightly better deal a few months ago vanish shortly?

BurnsCarpenter

True that.
Just starting to panic anew having seen the latest interest rate changes.

ixoy

BurnsCarpenter wrote: »

True that.
Just starting to panic anew having seen the latest interest rate changes.

Understandable - I got a little shock when I saw the repayments now on say 300k versus when I looked about a year ago. I suddenly couldn't get what I used to get... but the thing I suppose worth remembering is that neither can anybody else. That's why further house price drops must really be inevitable because people can borrow less and less money.

I think there's a strange sort of logic in buying in a market when interest rates/ lending criteria are at their peak as (ideally) house prices will have dropped to match the reduced mortgage amounts. Then you're in a much better place when rates drop versus those who bought at the lowest rates having to cope with rate rises.

Victor

BurnsCarpenter wrote: »

Just starting to panic

Why? Really, ask yourself "Why am I panicing?"

copacetic

Cantab. wrote: »

Do you even know how a tracker rate mortgage works?

he clearly does, you just don't seem to understand what he is talking about..

SimpleSam06

Victor wrote: »

Why? Really, ask yourself "Why am I panicing?"

Indeed. If your home of choice is slipping out of affordability because the banks are willing to lend less, there is no reason to panic because its out of affordability for most other people as well. Therefore the price will go down, and look, its all affordable again.

In fact its more affordable because you have hopefully saved up more of a deposit while waiting for it to drop, and hence will have less to pay overall.

I think this situation clearly underlines who was responsible for the property boom in the first place, tbh.

johnnyskeleton

BurnsCarpenter wrote: »

Good chance trackers will disappear altogether.

PTSB seem to have dropped tracker mortgages. I wonder how long it will take for the other banks to do so, as I believe they are already scaling back on them.

http://www.yourmortgage.ie/YourMortgage/InterestRates.do

BurnsCarpenter

Victor wrote: »

Why? Really, ask yourself "Why am I panicing?"

I suppose just from looking at interest rates going up and with all the recession talk, the idea that this might be the pattern for some time.

Also, while prices have been dropping in general it seems that it's mainly at the upper end of the market, and on new apartments. There hasn't been much of a change in the types of houses we're looking at - 3 beds close enough to Cork city centre.

But I think we're going to hold out for a year at least.
Appreciate the responses.

Firetrap

I was talking to a friend of mine a few weeks ago, admittedly one who bought a duplex about 2 years ago. She was telling me I should be looking around for a house now and that I'd want to get moving before the interest rates go much higher. There is a part of me like the OP who gets a dose of the panics every now and then over the same thing but I keep telling myself the prices have to drop.

SimpleSam06

Firetrap wrote: »

She was telling me I should be looking around for a house now and that I'd want to get moving before the interest rates go much higher.

So you want to be paying a larger mortgage off at the higher interest rate?

/facepalm

chump

Firetrap wrote: »

I was talking to a friend of mine a few weeks ago, admittedly one who bought a duplex about 2 years ago. She was telling me I should be looking around for a house now and that I'd want to get moving before the interest rates go much higher. There is a part of me like the OP who gets a dose of the panics every now and then over the same thing but I keep telling myself the prices have to drop.

It's this kind of thing that annoys me - absolutely pure fkkin ignorance and the gall to try and perpetuate that.

Jaysus I remember 2 years ago when I first began to rent. Paying a fair sum for a dublin city centre apartment. Some genius I barely met from work tells me 'shure jaysus ya could have a mortgage for that' - referring to my monthly rent. Yes perhaps in Meath I said. Good thing I didn't give a fkkin rashers what people like that had to say.

jackal

BurnsCarpenter wrote: »

I know everyone was saying you'd be crazy to buy.
But given that banks are withdrawing all of the attractive interest rate options - should I have bought two months ago? At least house prices will recover and grow, but those buying in the next few years will probably have much worse tracker rates (maybe +1.3% instead of +0.8%) for years to come.

I don't think you need to worry about house prices growing any time soon. The rates that people that bought a few years ago have are better, but if you hold off for a few years you are quite likely to more than make up for missing out on .5% of an interest rate difference due to property values going through the floor.

SkepticOne

Best time to buy is when interest rates are high and credit tight but prices have adjusted downward downward. Worst time is when interest rates are low and credit loose because prices shoot up to compensate.

The reasoning is fairly easy to understand. When interest rates are historically high and credit tight (and house prices are correspondingly low) chances are that the future direction of interest rates will be downward and credit will be loosened leading to a rise in asset prices.

During bubbles this reasoning is turned on its head. People forget that house prices are determined by interest rates and available credit (among other things) and regard house prices as fixed or obeying some sort of law that requires them to rise every year. Therefore people rushed in at what we now see to be precisely the wrong time.

DublinDilbert

jackal wrote: »

The rates that people that bought a few years ago have are better.

Yes there were lower rates available, people who took a fixed rate usually took a 3 or 5 year fixed rate mortgage, to hedge their bets so to speak as the fixed rate product is typically more expensive.

The problem is that for people who bought at the height of the boom, they are now coming off these fixed rates and they are in for a real shock!

In the likes of france it wouldn't be abnormal to get a fixed rate for the term of the mortgage...

oceanclub

Firetrap wrote: »

I was talking to a friend of mine a few weeks ago, admittedly one who bought a duplex about 2 years ago.

Why exactly would you want to take the advice of someone who is already in negative equity?

P.

Firetrap

I wasn't seeking advice. We were just chatting. I have to choose my words carefully around friends who bought in the last couple of years - I'm one of the last of my group of friends not to have bought. It was just interesting that someone who's bought still seems to think that now is the time to buy.

I agree with you all - that now isn't the time to buy and that prices are falling etc. However, there is a little part of me, the "sick of renting" part that longs for the day when I have my own place, no housemates, no sharing the fridge. I'm not getting any younger either - I'm 34 now. That's the little part of me that wonders if I made the right decision to wait.

TJM

Firetrap wrote: »

It was just interesting that someone who's bought still seems to think that now is the time to buy.

People have a funny habit of believing what it is in their interests to believe.

jackal

DublinDilbert wrote: »

Yes there were lower rates available, people who took a fixed rate usually took a 3 or 5 year fixed rate mortgage, to hedge their bets so to speak as the fixed rate product is typically more expensive.

The problem is that for people who bought at the height of the boom, they are now coming off these fixed rates and they are in for a real shock!

In the likes of france it wouldn't be abnormal to get a fixed rate for the term of the mortgage...

Well, I don't know what proportion of people took short term fixed rate loans. I don't think they are very popular in Ireland. I was talking about low LTV tracker mortgages.

chump

Firetrap wrote: »

I wasn't seeking advice. We were just chatting. I have to choose my words carefully around friends who bought in the last couple of years - I'm one of the last of my group of friends not to have bought. It was just interesting that someone who's bought still seems to think that now is the time to buy.

I agree with you all - that now isn't the time to buy and that prices are falling etc. However, there is a little part of me, the "sick of renting" part that longs for the day when I have my own place, no housemates, no sharing the fridge. I'm not getting any younger either - I'm 34 now. That's the little part of me that wonders if I made the right decision to wait.

Firetrap how much have you saved as a matter of interest?

If you have a wad of cash sitting in a bank you are in a great position. You can buy whenever you want.
Keep saving and jump in in a few years.

BobbyD10

http://www.myhome.ie/residential/search/brochure/6-the-maple-stepaside-dublin-co&-city/RPHEV353824

Looking at how small this apartment is for 330k, recently dropped from 345k, prices may still have some to fall. The pics that accompany the advertisment further show how small it is.

I wouldnt consider buying it till it hits 250k and even then a Plasma Tv will need to be thrown in.

Climate Expert

Firetrap wrote: »

I wasn't seeking advice. We were just chatting. I have to choose my words carefully around friends who bought in the last couple of years - I'm one of the last of my group of friends not to have bought. It was just interesting that someone who's bought still seems to think that now is the time to buy.

I agree with you all - that now isn't the time to buy and that prices are falling etc. However, there is a little part of me, the "sick of renting" part that longs for the day when I have my own place, no housemates, no sharing the fridge. I'm not getting any younger either - I'm 34 now. That's the little part of me that wonders if I made the right decision to wait.

Why live with housemates? If you are still living with people because you can't afford the full rent then you won't be buying your own house anytime soon.