House prices are at record highs and banks are pulling mortgages. But I’m still buying a house

Linda J. Dodson

“We don’t have any special deals or rates,” says Mr Stewart, “but we know how lenders’ calculations work and where the landmines might be. If you do it yourself you have to be prepared to put in the leg work and sit on the phone for a few hours when a bank changes its criteria or income multiples at 5pm on a Friday”.

So, with the Bank of England base rate at 0.1pc, what’s the best deal for our family? Prior to the financial crisis rates moved up and down a lot. Today there’s very little difference between two-, three- or five-year fixed rate mortgages. While first-time buyers with small deposits are having an almost impossible time getting lending, there’s still plenty of options out there for us homemovers.

London Money has found us a two-year fix at 1.14pc with Leeds Building Society which will cost us £1,456 a month. A three-year fix, at 1.63pc with Platform Home Loans, would cost just £100 more a month.

Mr Stewart says because the difference in rates is so small, deciding how long to fix for is not an economic decision, but a personal one. He also thinks that with government debt surging past £2 trillion for the first time, it is unlikely that rates will rise any time soon. “If there was a serious increase in rates the economy would collapse overnight.”

The important thing, he says, is whether there are any big life changes that might mean you have to exit the mortgage before the fixed-term period ends. Exit penalties can be as high as 5pc of the outstanding mortgage amount. One Telegraph Money reader recently had to fork out £40,000 after taking out a long-term fixed deal only to lose his job and be forced to sell his house.

And what of house prices? Again, Mr Stewart’s advice is to focus on your own situation, not the wider market. 

“What you need to worry about is: is your job safe and can you make the repayments? House price movements are irrelevant. If they go up, happy days, but it doesn’t matter unless you need to sell.”

Can anyone truly say their job is safe? With the exception of the NHS, teachers and other vital public sector jobs, no-one can afford to be overconfident about their employment.

Henry Pryor, a buying agent, says the only people who should be thinking about buying a home this month are those who know there are gold bars buried in the garden. 

My metal detector didn’t go “ping” as I traipsed around the garden of our house-to-be, but sometimes needs must. We are buying a home, not an investment, and have limited ourselves to borrowing not more than four times our salaries. Is that cautious enough? Fingers crossed.

Have a question or comment about parental finances? Email me: [email protected]

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