Disadvantages of Buying a House in UK
- Very Expensive In the UK the price of houses has increased so much it is becoming increasingly difficult to afford a mortgage. To get on the property ladder many first time buyers are using income only mortgages and or borrowing up to 6 times their income. This means that often a very high % of their income is going on mortgage payments.Getting an interest only mortgage does nothing to pay off the mortgage debt.
- Houses Could be Overvalued. Some industry experts consider house prices to be fundamentally overvalued and could fall by up to 30%. See house prices could fall. However it is worth nothing that many people thought they were overvalued 3 – 4 years ago, but since then house prices have continued to rise.
- Additional Costs Buying a house requires additional expenses such as mortgage indemnity protection, home insurance e.t.c. Maintenance to a house can be quite high, if there are any significant problems with the house.
- Interest Rates can Vary. Your mortgage payments are dependent upon the rate of interest. In 1992 UK interest rates rose to 15%. If this happened again, many homeowners would simply be unable to meet interest payments. They would have to sell or face their home being repossessed. To some extent you can protect yourself against fluctuating interest rates by using a fixed rate mortgage. However at the end of the 4 year term you will have to go back to the standard variable rate, which could be higher.
- High Cost of Deposit. To buy a house may require saving for a deposit. If you need 10% deposit this could require a lot of savings. The average house price in the UK is now over £135,000. Saving £13,500 is particularly difficult for young graduates who may have student loans e.t.c to pay off. For many the only options are to borrow from their parents, which itself has various problems and difficulties.
- Difficult to Move. The process of moving can be quite difficult and time consuming. If you frequently need to move area, due to work commitments owning a house can be a drawback. If you rent it is generally much quicker and easier to move, you are not tied to the same place as much. Stamp duty affects a high % of houses. The more you move the more tax and costs you will end up paying.
- See also: Advantages of Buying a House in the UK