If you're waiting for bottom to fall out -- beware
Published 06/04/2010 | 05:00
IF you are thinking about buying a house but holding back, waiting for prices to finish falling, then beware.
That is the message from mortgage experts who have calculated that even another 10pc fall in house prices will be wiped out by rising mortgage rates.
Mortgage manager at the Professional Insurance Brokers' Association Rachel Doyle said: "Potential buyers need to consider that interest rates are rising."
Ms Doyle explains using an example of a property that costs €200,000.
If a first-time buyer gets a 90pc loan-to-value mortgage over 30 years and fixes for four years with AIB, the interest rate would be 3.95pc.
Monthly payments would be €854, and the total cost of credit over the four-year term will be €14,889.
If, in six months, the price falls by 5pc, but the fixed rate increased to 4.95pc, it would mean that monthly repayments will shoot up to €912 (based on borrowing €171,000, or 90pc of the property's value).
The cost of credit over the four-year term of the loan would be €17,838.
If property prices fall by 10pc to take the value to €190,000, but the fixed rate increases to 4.95pc, it will become even costlier.
Monthly repayments would be €864 (based on a loan of €162,000) and the cost of credit over the term would be €16,899.