Sensible measures to improve the house market

justpurchased

!!!!!!? wrote: »

Yes - but even they still have some wage coming in, it won't be enough to easily meet the mortgage payments. That's why the multiple is lower.

eg Person A Earns 25k , Person B earns 15k

That's 40k combined.

If the bank loaned 3.5x 40k and person A lost their job, that's a problem. Even if it was only person B, still a problem.

But surley that is why people save and have PP. They are not going to be unemployed for ever isn't the average 3 months?
Also A single person on £40K can get a better house than a couple on a joint £55K (£40k and £15K).
Lets have familys in flats and single people in 3 bed+ houses.
Looks like a good way of starting the next housing bubble to me.
Also a single person with no wage coming in is worse than a couple with one coming in isn't it?

sdooley

A single person on £40K can get a better house than a couple on a joint £55K (£40k and £15K).

The couple would have a choice:

3.5 x the higher income plus 1 x the lower income i.e. £155,000

OR

2.5 x joint incomes i.e. £137,500

If they were both on £20,000 it would make more sense to use the second option:

3.5 x the higher income plus 1 x the lower income i.e. £90,000

OR

2.5 x joint incomes i.e. £100,000

justpurchased

sdooley wrote: »

The couple would have a choice:

3.5 x the higher income plus 1 x the lower income i.e. £155,000

But based on what you said how is that a lower risk The quote was for 2.5 joint?
Sorry not having a go at you both, but all i can see is that you disadvantage a couple for being a couple.
It is trying to make single people have as much buying power as a couple which is wrong sorry. It would push up HPI

StevieJ

I would like to see tax relief on income from primary residence, to allow people to maintain a base residence (rented out) and enable them to rent elsewhere as an alternative option to selling and buying.

sdooley

3.5 sole and 2.5 joint is shorthand for "standard lending criteria". Standard lending criteria always included the option of taking the larger income at 3.5 times and the smaller at 1 times, but because the majority of financially stretched borrowers historically (in terms of earnings multiples) were first time buyers, with two relatively equal incomes, most would take 2.5 joint.

It's easier to say 3.5 sole/2.5 joint than "3.5 sole/2.5 joint with the option for joint parties to choose 3.5+1".

If you gave couples 3.5 x joint incomes, then when, as couples do, one of them gave up work, there would be a totally unsustainable 7 x income ratio. This way couples can either go for 3.5+1, in which case if the low earner gave up work there would be a 4.5 times income ratio or 2.5 x joint, in which case if one gave up there would be an approx 5 times income ratio.

justpurchased

How many people give up work nowadays. People now save for having a child My wife was off for a year and now back 3 days a week.
The 2.5 & 3.5+1 figures were great for when men earnt more than women. But now that as changed equal opertunitys etc. What about the people who do not have children etc?
I think you have to give banks credit for risk and if they see 3.5X joint as affordable (no other debts etc.)
You can't go through life as nannys for the stupid, otherwise house ownership will be a thing for the well off.
As long as a mortgage is only 25-30% of the take home pay of a couple it is affordable.

WTF?_2

justpurchased wrote: »

As long as a mortgage is only 25-30% of the take home pay of a couple it is affordable.

UNTIL ONE OF THEM STOPS WORKING, for whatever reason (redundancy, pregnancy, sickness etc...)

SingleSue

justpurchased wrote: »

How many people give up work nowadays. People now save for having a child My wife was off for a year and now back 3 days a week.
The 2.5 & 3.5+1 figures were great for when men earnt more than women. But now that as changed equal opertunitys etc. What about the people who do not have children etc?
I think you have to give banks credit for risk and if they see 3.5X joint as affordable (no other debts etc.)
You can't go through life as nannys for the stupid, otherwise house ownership will be a thing for the well off.
As long as a mortgage is only 25-30% of the take home pay of a couple it is affordable.

Do they though?

I was told I couldn't get pregnant so we got on with enjoying life...guess what? I got pregnant (even if the doctor had to do several tests to convince himself! :rotfl: )

It certainly became a problem for us as I was the high earner, earning over double that of my husband, unfortunately, he didn't quite fancy the idea of being a house husband and the maternity rules were a lot less relaxed than they are now.

Oh and I don't think I could be classed as stupid either, victim of circumstances maybe but not stupid.

Also historically, house ownership was just for the well off... my grandparents generation it was not the norm but the exception to own a house.

justpurchased

SingleSue wrote: »

Do they though?

I was told I couldn't get pregnant so we got on with enjoying life...guess what? I got pregnant (even if the doctor had to do several tests to convince himself! :rotfl: )

It certainly became a problem for us as I was the high earner, earning over double that of my husband, unfortunately, he didn't quite fancy the idea of being a house husband and the maternity rules were a lot less relaxed than they are now.

Oh and I don't think I could be classed as stupid either, victim of circumstances maybe but not stupid.

Also historically, house ownership was just for the well off... my grandparents generation it was not the norm but the exception to own a house.

Don't get me wrong it is fine by me just that a lot of the people on here would never be able to buy unless house prices drop to silly levels. But the good thing about pregancy you do get a good few months to prepare so you still can build up reasonable saving as long as you are not overstretched.

SingleSue

I can see your point but as in our case, things went ever so slightly wrong in the end stages and any savings we had, were completely wiped within a very short space of time (the mortgage took all bar £48 of my husbands pay so the savings we did have had to cover things until I was allowed to return to work...unfortunately it was too late by then).

Of course this was years ago and things are a lot more generous now with maternity benefits, allowed time off work etc plus working rules are a lot different with regards to parents, job shares etc...they were not around when I had my first baby. If the same situation had happened now, we would have been ok.

I don't own a property and have no wish too unless I could buy outright but I do worry about my children's ability to get a foot on the ladder or even rent at a decent price, especially given the average salary around here..and this is the South!