Is buying a house now actually cheaper?

John_Cultane

Given that interest rates have gone up from the banks and are likely to rise more are houses actually cheaper to pay off?

I heard(maybe misheard) that 60% of mortgages are tracker mortgages. That would suggest somebody who bought a house a while ago is paying less for the amount of money they actually took out. So it is possible that even though a house cost less to buy a person who paid more for a house is actually paying the same mortgage but less time remaining. Anybody worked out the point that there is no difference?

I get some people think it was always a bad time to buy or have theories on when was best but are there solid calculations of the current rates you get versus the rate people were able to get and now pay?

Victor

No. House prices will go down, but repayments on new purchases will stay about the same (there will be a shift from vendors to banks in money paid by buyers). Repayments on existing properties will go up.

cutymonalisa

Victor wrote: »

No. House prices will go down, but repayments on new purchases will stay about the same (there will be a shift from vendors to banks in money paid by buyers). Repayments on existing properties will go up.

I bought in 2007 for 230k; house next door went for 170k last week :eek: Colleague at work bought recently for 195k (I had been looking in the estate she bought in when I was buying and they were 300K+ at the time) - was somewhat sickened at that pooint of the conversation. We compared mortgage repayments at lunch today. Her repayments are 200/mth more than mine. Thank god for my tracker mortgage. Takes the sting out of the negative equity, and its not so bad as I'm happy out and have no plans to sell - just as well!

John_Cultane

Victor wrote: »

No. House prices will go down, but repayments on new purchases will stay about the same (there will be a shift from vendors to banks in money paid by buyers). Repayments on existing properties will go up.

That is a bit of a strange reply as there isn't exactly a yes are no question. The answer will really be in form of a value either I am missing what you are saying or you have missed what the question is. As the other reply points out cheaper house doesn't mean cheaper repayments.

Victor

Hi, sorry, not sure what happened there. I seem to have only read the first line.

Imagine a few scenarios

1. Buy for 400,000 in 2006 - moderate interest rates
2. Buy for 400,000 in 2006 - moderate interest rates ECB tracker
3. Buy the same for 300,000 in 2009 - very low interest rates
4. Buy the same for 300,000 in 2009 - very low interest rates ECB tracker
5. Buy the same for 200,000 in 2010 - moderate interest rates ECB tracker not available

Until recently 2 was doing better than 1 as the drop in ECB rates lowered their interest rates a lot. Rising rates set by the banks themselves have increased the rates substantially beyond the tracker.

There has been little difference between 3 and 4.

On the face of it, 5 has a better deal than 3 or 4, but they may be paying a lot more in interest. However, they are likely to be doing better than 1 & 2.

dudara

This is something I'd be very interested in seeing some calculations on. Yes, prices are cheaper, but rates are higher. So, in the long run, who pays more?

Senna

2 people buy the same house, one in 2006 and one in 2010.

Person A buys in 2006, mortgage of 250k for 25yr
On a tracker s/he pays an average of 3.5% over the life of mortgage, so repayments are €1250 (375K total)

Person B buys in 2010, mortgage of 150k for 25yr
On SVR s/he pays an average of 7% over life of mortgage, so repayments of €1060 (318k total)

Thats allowing a margin of 3.5% over tracker (i'm being generous) and less than a 50% drop in house price.