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.

ixoy

Climate Expert wrote: »

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.

Or maybe they're living with people to, y'know, save more money to buy their own place?

Climate Expert

ixoy wrote: »

Or maybe they're living with people to, y'know, save more money to buy their own place?

Stupid logic.

How many years to you need to save an 8% deposit for?
If you have living with people so much then why do it for 14 years (guessing here)

SimpleSam06

Climate Expert wrote: »

Stupid logic.

How many years to you need to save an 8% deposit for?
If you have living with people so much then why do it for 14 years (guessing here)

To save up a 25% deposit? The more initial savings you have, the less you need to spend overall, you're saving two or three euros for every euro that you spend. Sounds pretty smart to me. Alternately if you become unemployed or otherwise lose your taste for this fine nation, you can take your large savings and start off elsewhere. Options are always good.

Calina

Climate Expert wrote: »

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.

Well I live with housemates in rental even though I could pay a mortgage on my own. As a lot of people talk about how rent is dead money, I find this dilutes the pain a little. Also I can tolerate sharing rent but will not share my own place.

Quite a lot of people are desperately looking for housemates to subsidise their mortgages. Unfortunately lots of people like me won't touch owner occupied accommodation and I don't want to have to be in their position.

It's not stupid logic to make different decisions based on different criteria at different stages of your life. Given that rent on a room in a three bed house could be 500E and a mortgage on a smaller property could be 1400E a month and rising while its resale value is falling...I'm having some difficulty seeing the stupidity of rent sharing under those circumstances even if you have the 1400E a month. Even if you don't save it, you get quite a lot more life out of it, I feel.

beeno67

Calina wrote: »

.

It's not stupid logic to make different decisions based on different criteria at different stages of your life. Given that rent on a room in a three bed house could be 500E and a mortgage on a smaller property could be 1400E a month and rising while its resale value is falling...I'm having some difficulty seeing the stupidity of rent sharing under those circumstances even if you have the 1400E a month. Even if you don't save it, you get quite a lot more life out of it, I feel.

The point is Firetrap says he "longs for the day that he has no housemates, no sharing the fridge" If he longs for that day then why not move into a place alone.

Calina

beeno67 wrote: »

The point is Firetrap says he "longs for the day that he has no housemates, no sharing the fridge" If he longs for that day then why not move into a place alone.

I long for it too but I think that the single occupancy rental market in Dublin is nothing short of a rip off. So although I'd prefer by far to live on my one, the premium demanded for it deters me as the properties are not worth the money that is commanded for them. But for what it's worth, I sure as hell wouldn't buy them either. They are by and large very poor quality properties.

I used to live on my own in Brussels for less than I pay to house share in Dublin.

In any case, people will make different decisions based on whether they rent or buy. I'll share rent but I will not rent a room if I am paying a mortgage. You may consider that irrational but I don't. I make it a reasoned call based on current situation.

Mr. Presentable

It is always a good time to buy a house.

All the talk of neg equity etc is nonsense - unless you are a short term investor - homeowners usually stay in their property for 10-15 years and your property will readjust positively over time.

Important to remember, economics are cyclical.

beeno67

Calina wrote: »

I long for it too but I think that the single occupancy rental market in Dublin is nothing short of a rip off. So although I'd prefer by far to live on my one, the premium demanded for it deters me as the properties are not worth the money that is commanded for them. But for what it's worth, I sure as hell wouldn't buy them either. They are by and large very poor quality properties.

I used to live on my own in Brussels for less than I pay to house share in Dublin.

In any case, people will make different decisions based on whether they rent or buy. I'll share rent but I will not rent a room if I am paying a mortgage. You may consider that irrational but I don't. I make it a reasoned call based on current situation.

But Callina no one was talking about you or your situation. The point was made re Firetraps situation not yours. He said he was considering buying as he wanted to end having to share a property. Renting a house alone is cheaper than buying alone, so why doesn't he move to a property alone. That was more or less Climate Experts point which I agree with

Calina

beeno67 wrote: »

But Callina no one was talking about you or your situation. The point was made re Firetraps situation not yours. He said he was considering buying as he wanted to end having to share a property. Renting a house alone is cheaper than buying alone, so why doesn't he move to a property alone. That was more or less Climate Experts point which I agree with

Yes but you fail to look at the type of property concerned. If Firetrap were to say that he wouldn't because single occupancy properties in this city are scary bad - which for the most part they are - I wouldn't crib.

My situation is not that different. I don't know what your problem is. Yes living in a one bedroomed apartment costs less than buying it but that doesn't mean said apartments are desirable places to live in.

Calina

nipplenuts wrote: »

It is always a good time to buy a house.

This is naive. It is a better time to buy when the property will cost you 100K less. As property is currently on a downward trajectory, now is a bad time to buy, particularly if you will need to trade up at all within a few years.

This unfortunately is the case in Dublin. Starter homes are not designed to be lived in,they are designed to be traded up out of.

gurramok

beeno67 wrote: »

But Callina no one was talking about you or your situation. The point was made re Firetraps situation not yours. He said he was considering buying as he wanted to end having to share a property. Renting a house alone is cheaper than buying alone, so why doesn't he move to a property alone. That was more or less Climate Experts point which I agree with

The point Calina made was that renting alone is also prohibitively expensive as buying.
Renting a house by yourself will set one back at least 1,200 in the not so fashionable areas or maybe 1000 for a 1bed apt in a suburban location. A mortgage for a singleton is mostly unobtainable as prices are too high plus a big deposit is needed. (rent a room to help pay a mortgage goes against the grain of 'getting your own place')

Point being, renting and buying on your own in this country is way out of whack. I suspect the floor for rent allowance levels has something to do with the high rents.

Climate Expert

gurramok wrote: »

The point Calina made was that renting alone is also prohibitively expensive as buying.
Renting a house by yourself will set one back at least 1,200 in the not so fashionable areas or maybe 1000 for a 1bed apt in a suburban location. A mortgage for a singleton is mostly unobtainable as prices are too high plus a big deposit is needed. (rent a room to help pay a mortgage goes against the grain of 'getting your own place')

Point being, renting and buying on your own in this country is way out of whack. I suspect the floor for rent allowance levels has something to do with the high rents.

No renting alone for the same property is cheaper than buying. If he can afford to pay a mortgage to live alone then he can afford to rent alone.

A place with 1200pm rent will probably cost 1800pm in mortgage. We're not talking about one bed apts here unless thats what the OP is thinking of buying.

Mr. Presentable

Calina wrote: »

It is a better time to buy when the property will cost you 100K less.

Of course, but it is not the same as saying it's not a good time. In the long term any loss will still be recovered - the only ones who'd really be disadvantaged are short term buyers. But I said this already.

Calina

Climate Expert wrote: »

No renting alone for the same property is cheaper than buying. If he can afford to pay a mortgage to live alone then he can afford to rent alone.

A place with 1200pm rent will probably cost 1800pm in mortgage. We're not talking about one bed apts here unless thats what the OP is thinking of buying.

Well without knowing his exact circumstances, I can't comment on what he is thinking of buying.

However, I see a financial benefit if you aspire to buying in reducing your rent out going in the short term by sharing and upping the amount of money you can use as a deposit whilst simultaneously watching prices slowly slide downwards.

Calina

nipplenuts wrote: »

Of course, but it is not the same as saying it's not a good time. In the long term any loss will still be recovered - the only ones who'd really be disadvantaged are short term buyers. But I said this already.

The problem in Dublin - in particular - is that many, many FTBs were relying on the short term gain to be able to trade up. That was the whole property ladder thing. There's no point in saying "only...will be affected" when, in a particular market, that only represents a lot of buyers. The property market has ground to a halt because there are no investors and no FTBs.

SimpleSam06

nipplenuts wrote: »

In the long term any loss will still be recovered

The long term we're talking about is people's lives. The only thing buying now does is enrich bankers.

gurramok

Climate Expert wrote: »

No renting alone for the same property is cheaper than buying. If he can afford to pay a mortgage to live alone then he can afford to rent alone.

A place with 1200pm rent will probably cost 1800pm in mortgage. We're not talking about one bed apts here unless thats what the OP is thinking of buying.

Yes i agree about mortgage been more expensive than renting in most cases. What i was getting at is that its also expensive to rent on one's own.

Most people i know who rent have to share as they say rent is too expensive, they cannot afford mortgages on their own either (which we know already are too high for the same property)
For example on daft, in alot of cases there is only a difference of 100 euro in renting a 1bed from a 2bed and maybe another 200-300 euro for a 3bed.
Why is there a small difference in rent but yet a wider gap in proportion for a mortgage on the same properties? (mortgage a 1bed, 2bed, 3bed..bigger difference in repayments between the 3 as to smaller difference in rents on same gaffs)

The cheapest for renting are 1bed's, there's no justification for charging 1000 pm on them as they are mostly only suitable for singletons and most are in unfashionable areas at that price, the yield is not justifiable.(a singleton earning avg ind wage of 33k(2362pm) would fork out nearly 50% of take home pay after deducting pension etc for a 1bed at 1000pm, outrageous!)

Which sums up, rents for 1beds and 2beds need to come down as the rents too high to justify.(but Rent allowance is probably helping them there)

jackal

nipplenuts wrote: »

Of course, but it is not the same as saying it's not a good time. In the long term any loss will still be recovered - the only ones who'd really be disadvantaged are short term buyers. But I said this already.

Eh, most first time buyers I know are planning on staying in the house for 5 years max. This time is to calculated to accumulate enough equity to buy a better house.

Why do you say any loss will be recovered in the long term? This is simplistic in the extreme. House prices track inflation over the long term. Have a look at this graph. House prices adjusted for inflation

Looking at that graph, average people have only made real (inflation beating) profit from property since the mid 90's. What way do you think that graph would be going in the last two years?

In addition, first time buyers have to take the stamp duty exemption into account. You only get to use it once, so use it wisely. So its not always a good time to buy, when they could blow their exemption on an unsuitable 2 bed apartment now, or wait and get a 3 bed semi for the same money.

The person who waits will enjoy a better quality of life for the term of their reduced mortgage, in addition to getting more house for less money.

Basing your advice on what happened in Ireland in the last 10 years is all very well, but it does not take a genius to look at any graph, chart, or set of statistics and see that property prices here are just coming down off the peak of a hugely inflated bubble (versus traditional prices) and are likely to plummet. It could be a long long time before they come close to recovering a loss.

So in conclusion, no its not always a good time to buy, and it could be argued that bar anyone that bought since 2006, now is the worst time in Irish history to buy property.

oceanclub

jackal wrote: »

Eh, most first time buyers I know are planning on staying in the house for 5 years max. This time is to calculated to accumulate enough equity to buy a better house.

Yes, even by Mr. Nut's logic, it means that most apartment owners are in trouble. What proportion of people who buy an apartment plan to live in it 20 years? Very few people buy for life these days, and indeed most of the rationale for buying a house in the last few years was to get on the mythical property ladder - that is, buy something, ANYTHING, no matter how crap, small, or out-of-the-way it was, as long as you buy something.

Well, thousands - hundreds of thousands - did. And now Mr. Nuts is saying that all these people are actually perfectly happy where they are, so no problem?

P.