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Buy 1 bed now (low interest rate) or wait to buy 2 bed (high interest rate)

  • 03-07-2022 5:33pm
    Registered Users Posts: 174 ✭✭

    Hi there,

    I am looking to buy a property. I was looking to apply for the Rebuilding Ireland Home Loan scheme which gives up to 5 times your salary at a rate of around 2.75% interest fixed for a 35 year mortgage. I could apply for this in January so probably draw down around mid 2023. However, the ECB could raise interest rates by quite a bit by then, massively reducing the benefit of a low fixed interest rate that comes with this scheme. I could probably afford a 2 bed with this scheme.

    Alternatively, I could probably afford a 1 bed now and look for a similar fixed rate mortgage offer from a bank. The benefit being I will have a fixed low interest rate but that in 3-5 years, I will probably be looking to buy a larger place.

    I am basically looking for people's opinions on the two options. If I get a 1 bed now on a fixed rate mortgage, but want to borrow additional funds in the future to upsize, can I keep the fixed rate mortgage? Any other things to take into consideration?



  • Registered Users Posts: 113 ✭✭LJ12345

    Personally I’d hold out for the bigger place if you know you’ll need the space, think about cost of selling and buying again next year, what if you can’t sell the 1 bed.

    if you had longer plans for the 1 bed or to become a landlord (not advised currently) it might be worth buying now but there’s a chance they’ll overshoot on the interest rate rises and drop them again to stimulate the economy. It’s an uncertain market out there, trust your gut and don’t get caught up in any madness.

  • Registered Users Posts: 174 ✭✭DonnieCorko

    Thanks for the reply.

    It wouldnt be buying and selling within a year, but rather 3-5 years. Selling a one bed could be harder though if recession hits.

    However, I would be looking to buy in 3-5 with my gf, so we would have her income as well, which could allow us to get a 2 bed then, and keep the 1 bed. My family do 1 month+ stays via airbnb that is very lucrative so having a second property was always my medium term goal.

    "but there’s a chance they’ll overshoot on the interest rate rises and drop them again to stimulate the economy." ECB seems to be raising rates incredibly slowly compared to the Fed so I am not sure this will happen as quick as it will in the US which is also a concern.

    My gut changes day by day lol!

    Thanks again for the input!

  • Registered Users Posts: 116 ✭✭clobber

    Interest rates can change

    The property can't

    Semantics and numbers after that

  • Registered Users Posts: 17,801 ✭✭✭✭Donald Trump

    Girlfriends can also change, or be changed. I wouldn't be making a decision today which depended on having that girlfriend and her salary available in 3-5 years.

  • Registered Users Posts: 174 ✭✭DonnieCorko

    True, but if I don't have a gf in 3-5 years, I won't have a kid, and won't need a 2 bed :-)

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  • Registered Users Posts: 3,096 ✭✭✭Browney7

    What are your current living arrangements OP and what rent are you paying or are you living at home? Reason for asking is that if you have a decent value rent now, it may not be a prudent move to buy a one bed and then try buy another property in 5 years time. Wheras if you are being rinsed for 24 grand a year in rent at present then it changes the payoffs (in my opinion anyway). If you are eligible for rebuilding Ireland home loans are you eligible for HAP?

  • Registered Users Posts: 174 ✭✭DonnieCorko

    Completely forgot to mention rent which is why I am eager to buy ASAP rather than wait for a potential fall in prices. Paying 1400 atm between myself and gf (plus bills which are extortionate due to electric heaters) but we are also sharing a house. Could be paying another 400 a month easily if we need to leave here which we may have to do in the near future (6 months).

    Rebuilding Ireland loan you just need to earn less than 60K whereas HAP would be far less before youre eligible.

    Either way, Im pretty resolute on buying soon, its just whether I try lock in a low interest 1 bed now or wait another year before I drawdown and get a likely much higher interest rate 2 bed.

    Thanks for the reply!

  • Registered Users Posts: 3,213 ✭✭✭Mic 1972

    My advise. Buy now

    Nobody knows what the future holds for the property market in 3-5 years.

  • Registered Users Posts: 174 ✭✭DonnieCorko

    Youre saying buy 1 bed now over a 2 bed in a year?

  • Registered Users Posts: 8,239 ✭✭✭Pussyhands

    By the time you apply for a mortgage now, go through the process, find a place you want to buy, go sale agreed and then draw down the mortgage you're talking 6 months at least. The interest rate situation could well be much worse by then anyways as if inflation remains high for the next 3 months or so they're going to raise even higher.

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  • Registered Users Posts: 174 ✭✭DonnieCorko

    I think the ECB announced (or are expected to announce) rate hikes for July, December, January so far. So potentially a .5-1% increase if I went the 1 bed route by the time I drawdown.

    I am wondering if Irish banks will pass down the rate hike as well. Our rates are already quite high. Stupid thought most likely though.

  • Registered Users Posts: 3,213 ✭✭✭Mic 1972

    Yes. Secure the 1-bed now. Stop paying rent.

    Even if you have a baby in 3-5 you can still stay in a 1-bed for a while.

  • Registered Users Posts: 8,239 ✭✭✭Pussyhands

    But the announcement on future rate hikes will be known before then and banks will rise their rates in advance.

  • Registered Users Posts: 174 ✭✭DonnieCorko

    I understand that but the reality is that the rates imposed this year likely won't be anywhere enough to curb inflation in the EU so further more aggressive rate hikes will be needed in 2023. Flip side is many EU countries may not be able to handle rate hikes so the ECB may prefer to live with moderate inflation rather than bring it back down to 2%