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Is Now A Good Time To Buy A Camberley Home?

Is Now A Good Time To Buy A Camberley Home?

This is the question many people are asking right now, and the answer depends on your circumstances.

I pride myself on my ability to provide objective, fact-based information on the Camberley property market so potential Camberley house sellers, landlords and buyers can make the best decision for themselves.

My role is to educate the potential Camberley house sellers, landlords and buyers and to provide them with the best possible information available, not to convince them to do something they don’t want to do.

To answer that big question in the title of the article (is now a good time to buy a Camberley home?), it comes down to three things.

  1. How much will you get for your Camberley home when you sell it?
  2. How much will you have to pay for your new home?
  3. How much will that move cost you in ongoing monthly mortgage payments?

To answer points 1 and 2 correctly, I need to address point 3, which relates to interest rates.

The click-bait newspapers and websites are pushing messages to potential sellers and buyers towards the top end of the sensationalised scale. I prefer to define what is happening, i.e. the reality.

On the face of it, it doesn’t look good.

 The average 5-year fixed rate mortgage has risen from 2.11% at the beginning of January this year to 6.21% in early November.

 Yet even though the Bank of England increased the base rate by 0.75% on the 3rd of November, the average 5-year fixed rate mortgage dropped by 0.22% between the 3rd week in October and bonfire night. As interest rates go up, mortgage rates are coming down even though interest rates are projected to increase to 4.5% by the autumn of 2023.

So, why did the Bank of England mention in the first week of November that the UK is facing a two-year recession? Some might think this controversial, yet the Bank of England wants a recession as it will aid in reducing inflation. It’s as plain and simple as that!

Instead of relying purely on interest rates to reduce inflation, the Bank of England is hoping if we go into some form of shallow recession, it will not need to increase interest rates much above the anticipated 4.5%.

However, whether it’s interest rates or a recession, both will slow the number of home sales in Camberley and will indirectly affect Camberley house prices.

So will Camberley house prices drop? By how much and what money will it save you if you wait?

 I have spoken recently in my property blogs about the Camberley property market, and the prices that will be achieved for homes in late 2023/early 2024 will be between 5% to 10% lower than what is being achieved today. Increasing mortgage rates, inflation and affordability will mean the price people can pay for a Camberley home will be curtailed because of those factors. Let’s assume a reduction of 10% in Camberley house prices.

Around 81 in 100 existing homeowners are buyers. When they sell their home, they almost always move upmarket regarding accommodation and location. Hence, they will pay more for the home they buy than the property they sell.

So, if you are in Camberley and live in a 2-bed house (average value £352,250) and want to buy a 3-bed house (average value £450,200), the difference between both would be £97,950.

If Camberley house prices dropped by 10% in a couple of years, that £352,250 2-bed house would drop to £317,025, and that £450,200 3-bed house would drop to £405,180, meaning the gap would drop to £88,155. Thus, saving the home buyer £9,795.

So, should they wait?

Yes, until you look at the monthly ongoing mortgage payments.

Assuming our Camberley homeowner has an existing mortgage of £200,000 and added the difference of moving up the property ladder to the mortgage. If our Camberley home mover moved now, their mortgage payments would be £1,568.94 per month (assuming a 35-year mortgage on a 5-year fixed rate at 5.34% with First Direct).

The other scenario would be if our Camberley buyer waited a couple of years for Camberley house prices to drop 10% (to save £9,795 as mentioned above) to make a move.

Everyone acknowledges interest rates will rise in the next two years, so the monthly mortgage payments when they move (even though they are borrowing less) would be £1,879.42 per month (based on a 5-year fixed mortgage being 7.19% in 2 years).

By waiting 2 years, it will cost the Camberley homeowner £310.48 extra per month in interest payments or £18,629.09 over the 5-year mortgage term.

The point is that because interest rates are forecast to go higher in the next couple of years, this provides potential Camberley buyers with the prospect of locking in their monthly housing expenses by moving now.

By buying now, it hedges against rising interest rates; consequently, your monthly mortgage payments are going to be higher. It offers an opportunity, through re-mortgaging, to lower your mortgage costs should interest rates fall.

What about Camberley first-time buyers?

I wrote an article on the Camberley property market only a few weeks ago. Even when we looked at house prices dropping by 18% in two years (because in the 1988 house price crash, the market dropped by 20% and 17% by 2008), the savings made on the purchase price were blown out of the water with the two extra years of rental payments, the higher deposit and higher interest payments.

The actual crisis in the property market today is the rocketing rental rates.

Whilst a fixed-rate mortgage locks in your monthly housing costs, rental rates are rocketing upwards, and a tenant today can realistically expect higher monthly costs in the coming few years.

Though most of the press generally focuses on the monetary aspects of buying a home, there are also choices on homeownership that are not exclusively based on financial decisions.

Why are you considering buying a Camberley home?

Buying a Camberley home is very personal and predominantly driven by your life events like divorce/marriage, a job move, a new addition to the family, elderly parents moving in etc. These are often the influences that drive the decision to buy (or not buy) a home.

Homeownership has always been a foundation stone of the British dream.

Homeownership offers control and a sense of security that renting simply cannot provide.

The doom-monger headline-grabbing newspapers often overlook these non-economic factors affecting the desire of a potential home buyer.

The one important thing from the last few years since the first lockdown in 2020 is that people still want to own their own homes.

They still want to have their ‘castle’, to pull up the drawbridge when things get tough, a place that they and their family can call their own. Never forget that homeownership is much more than house prices and graphs; it’s about the ‘Englishman’s home is his castle’ dream.

Let us remember most people in the UK have been able to build and grow their family wealth through homeownership. That is why I like to provide the best information on the Camberley property market so you can make the best decision for yourself and your family. Please drop me a line if you wish to pick my brain on anything discussed in this article.

Newspapers and clickbait 24-7 news websites, desperate for clicks, are peddling a story of a doomsday time for the economy, particularly the property market, as interest rates and inflation create the perfect storm for the UK property market.

So, let us look at what is happening in the British property market and whether house prices will drop.

Yes – Camberley house prices will be lower in 24 months.

Yet the reductions in what I believe a property will sell for in the next couple of years compared to the doom-mongers is wildly different.

The doom-mongers are saying the 2022 property market will be like the crash years of 1988 and 2008.

I’m afraid I have to disagree, let me explain what the difference is this time compared to the previous house price crashes.

To start with…

56.25% of homeowners don’t have a mortgage, whilst in 1988, that was 35.8%. These people are shielded from the interest rate rises.

The next point is negative equity.

Yes, negative equity was an issue after 1988 when everyone had an endowment mortgage, so they never paid any of the capital off their mortgage. Therefore, when house prices dropped, negative equity was a massive issue as people owed more than what their house was worth.

By 2008, nobody was taking out endowment mortgages, yet still, 1 in 2 were interest-only mortgages (meaning the capital wasn’t being paid off). Today, 17 out of 20 homeowners are on repayment mortgages – so they have more home equity, so negative equity isn’t so much an issue.

The issue is the increasing interest rates. Yes, they are rising … albeit from artificially low rates.

In 1988, nearly everyone was on a variable rate mortgage and an average mortgage interest rate was 10.8%, and they rose to 16.4% by 1990. That hurt, yet most survived.

In 2008, 6 out of 10 homeowners had learned their lesson and were on fixed rates at an average rate of 6.07%. Today 17 out of 20 homeowners have long-term fixed rates with an average of 2.14%.

Also, it must be noted that homebuyers have been stress tested for 6% to 7% mortgage rates since 2014 because of the Bank of England MMR rule changes. It will be challenging, and lifestyle choices will need to be made, yet we should not see the dumping of houses on the market as we did in 2008/9.

The next issue is the number of mortgages being pulled. Yes, around 1,000 mortgage deals have been removed in the last week – yet there are still 3,000+ deals out there… and most are still fixed rates.

Also, let’s not forget that 1 in 5 people rent today and are protected from all this, yet in 1988, only 1 in 14 rented.

Therefore, the economic conditions surrounding the house price crash in 1988 and 2008 are not there now.

Don’t get me wrong, those homeowners coming off their fixed rates of around 2% in the coming years will have to make tough choices as they will see their monthly mortgage payments rise substantially.

Yet, as I have discussed in other articles, extending your mortgage term can significantly affect your monthly mortgage payments and there are things that homeowners should be doing now to mitigate the issue in the coming few years.

But back to the question, should people wait to move, and what will happen to Camberley property prices?

I believe that subject to nothing seismic happening in the world, Camberley property values will be broadly neutral and slowly drift downwards over the next 24 months. I believe they will drift because of the issues of inflation and mortgage affordability, yet we won’t have a crash for the points made in the first part of this article. I believe Camberley property will be selling for sums of 4% to 6% less in a couple of years compared to today.

This means if we achieve prices of 4% to 6% less, homeowners will still be getting the same prices the property market was getting in the summer of 2021 – again – nobody was complaining about those!

However, let us assume I am wrong with my thoughts, and we see a significant house price crash; what then?

Well, let me look at the last two house price crashes first.

The housing crash of 1988 saw the average house in the UK drop from £63,784 to £50,167, a drop of 20.09%.

The housing crash of 2008 saw the average house in the UK drop from £184,132 to £154,065, a drop of 16.33%.

So, let’s assume that Camberley house prices fall by 18% – surprisingly, it will not help Camberley buyers.

In previous house price crashes, people tend to find their careers are more at risk, and in turn, their wages don’t rise as much. It is the younger generation (i.e., first-time buyers age range) that often gets hit the toughest by these recessions.

Let me look at Camberley first-time buyers.

If Camberley first-time buyers wait until 2024 to buy and Camberley property values drop by 18%, that will prove more expensive. Let me explain why…

In the last property crash of 2008, lenders withdrew 5% deposit mortgages. The smallest mortgage that first-time buyers could obtain was with a 10% deposit, and even those were hard to come by.

When writing this article, first-time buyers can obtain a 5% deposit mortgage for a fixed rate of 3.92% for five years.

The typical first-time buyer terraced house in Camberley sells for £374,695.

If first-time buyers were to buy now, on this mortgage deal, they would have to find a £18,735 deposit, and their monthly mortgage payments would be £1,559.07 per month.

So, let’s say property values in Camberley do drop by 18% in the next 24 months; the terraced house would now be worth £307,250, a significant saving in the purchase price.

Or is it?

Everyone believes the Bank of England will raise interest rates further, so let’s assume they go to 5.5% by the autumn of 2024. That will mean the rate for a 10% deposit first-time buyer mortgage will be in the early 7%’s, so let me assume 7.19% (because the lenders have in the past increased the gap between the Bank of England base rate and the mortgage rate in more challenging economic times to allow for the extra risk).

The monthly mortgage payment in two years on the 7.19% mortgage would be £1,803.57 per month, and in those two years, you would have had to have saved an additional £11,990 to make up your 10% deposit of £30,725.

So even if Camberley’s house prices did drop by 18%, the first-time buyer would be £2,934 worse off a year in mortgage payments (and would have to save many thousands extra for their deposit)

…and then there is the other cost of waiting.

You have two years’ worth of rent to pay. The average rent for a Camberley property is £1,536 per month.

If you waited a couple of years for Camberley house prices to drop by 18%, you would spend £36,864 in rent plus have higher mortgage payments in 2024/5/6 and with the extra deposit mentioned above would add up to an additional £57,656 over the next five years.

Yes, the price you paid for your Camberley home would be lower if you waited two years. Yet, you would only benefit from that when you sold on versus the economic pain of two years of extra renting, the higher deposit and higher mortgage payments in a couple of years.

This doesn’t even consider the emotional cost of putting your life on hold for two years, and there is no guarantee that the mortgage lending criteria in two years would allow you to step onto the property ladder.

So, now I have shown that waiting will cost you financially and emotionally, what are your thoughts on the matter?

Camberley house prices will drop, yet did you realise it will cost you more, even if house prices are falling?

Do you believe the doom-mongers, or do you believe in the robust nature of the British economy?

Don’t forget, George Osbourne said house prices would drop by 18% in May 2016 if we voted to leave the European Union, whilst many economists said house prices would fall by 5% to 10% when Covid hit in March 2020.

We all know what happened to those predictions now.

These are my thoughts – what are yours?

Whether you are selling, buying, letting or renting, we’re here to help. Call Jon and our team on 01276 539111 or email: enquiries@knightspropertyservices.com  for expert advice which is honest, accurate and informative.

If you’re looking to sell, book your free sales valuation now

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