News: FSA to cap mortgage borrowing

yaustar

Some interesting news from the Telegraph....

"Homebuyers will be prevented from borrowing more than three times their annual salaries under new mortgage rules to be announced this week."

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/4995778/FSA-to-cap-mortgage-borrowing.html

silvercar

Get arounds will be found.

Remember NR together mortgages were never 100% but 95% mortgage +30% unsecured loan.

Gorgeous_George

Credit controls worked in the past.

Simple solution is to pass a law that states that no individual can be given a loan more than three times their salary. Any new debt over this amount becomes not reclaimable.

GG

Jennifer_Jane

I think this is too stringent. I wouldn't have been able to get my house at 3x my salary - (which was £16000 when I bought in 2000. £16000 x 3 = £48000 plus the £20000 deposit. Impossible!).

Jen
x

Robert_Sterling_3

A well excellent solution. :j :j :j

maninthestreet

That will plunge the housing market into further crisis. People will see their properties devalued overnight.

Gorgeous_George

It will limit FTBer properties to 3x income. Larger properties will cost more but the days when a 3 bedroom terraced cost £160K will be consigned to the waste bin.

If only the Tories hadn't scrapped credit controls. Maggie's Legacy.

GG

Comyface

maninthestreet wrote: »

That will plunge the housing market into further crisis. People will see their properties devalued overnight.

I agree, it will only make house prices drop further/faster than they already are.

Also, lenders don't tend to use income multiples any more anyway. I bought on my own for the first time in 2001 and the multiple I was given was 3.56 at the time. When I moved in 2007, the multiple worked out at 4.2 (based on 'affordability' rather than multiples) but I took a longer term mortgage of 30 years (I'll still be under retirement age when it finishes) which made it affordable.

Multiples didn't make much sense when you consider someone taking out a mortgage for 10 years would pay a lot more per month than someone taking out a mortgage of the same amount for 25 years. If the income was the same for both, which one would be more affordable?

koexelek

The lenders will certainly give that the thumbs up.

Will mean most first time buyers won't even need to bother applying

SmileyG_2

yaustar wrote: »

Some interesting news from the Telegraph....

"Homebuyers will be prevented from borrowing more than three times their annual salaries under new mortgage rules to be announced this week."

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/4995778/FSA-to-cap-mortgage-borrowing.html

Why 3x salary? Why not 4x or 2.5x?

It's the nanny state in action again.

I bought my first property on a 3.5x mortgage and the next on a 3.1x mortgage. The first nearly starved me (mortgage rate of 12.75%) and the second 12 years later was cheaper than the first.

Affordability should always be a factor in lending money, as well as house price trends. I can't believe that lenders will ever go back to lending for the housing market like they have recently, except ....

1) They said that in 1991
2) They always believe that house prices will continue to rise, even when all the data indicates a bubble.
3) There's money to be made any any mortgage market (even a distressed one).

Perhaps this once, lenders have learned the lesson, except they say the memory of a financial market is 3 years, so maybe I'll be writing this in 2012.

In the meantime, its back to saving for the next property boom;)

SmileyG

poppy_f1

if this happens then i'll struggle to get a mortgage then