News: FSA to cap mortgage borrowing

Errata

A more sensible option would have been to ensure lenders offer mortgages which can be paid back over 30 or 40 years. 35 year mortages in the 60's were very common.

michaels

It saddens me that so many people think this is a good idea.

Why don't we just get the Govt. to provide houses to everyone according to their needs and charge them rent according to their income - of course the income needs to be fixed too and you can pick up your weekly alcohol ration at the same time...

opinions4u

It will devastate the market.

The government says "lend more" to the banks on one hand.

Then tells them to restrict lending via the FSA on the other.

Ridiculous. Commence chants of "you don't know what you're doing".

3 x salary. What about self-employed. Overtime? Bonus? Commission?

I'm all for sensible lending, but not for government controlled lending.

(by the way, poor corporate lending is what's stuffed most of our banks, not the mortgages - although I'm sure we'll see some big residential write-offs this year).

Errata

Overtime, bonus and commission aren't guaranteed, which is why some people come unstuck if they've relied on them to pay the mortgage.

koexelek

michaels wrote: »

It saddens me that so many people think this is a good idea.

It's easy to give the thumbs up to something that is not going to effect you directly.
Another short sighted view by the government. Income multiples are relevant to interest rates.
For example, when the rates were 15%, a £100k mortgage would have costed £1280 per month.
At 5%, the same mortgage would cost £584 per month ( both on repayment)

If we apply the 3 times income multiple, and assume the borrower was on £33k, the 15% mortgage payment would work out at 46% of their monthly salary.
At 5% it comes out at 21%.

in both cases we are using a bog standard three times income, but in one example the mortgage payment is a crippler, where as in the other example, it is easily affordable.

That's why blanket income mulitples don't always work

movingforward2010

well anyone earning under £50k will have to rent then!! not a solution really is it

figgyroo

I bought my first place in 2003, have moved since, and am in the process of arranging my third remortgage now. All the mortgages I've had have been around 4x my salary. I've never been late or missed a payment on any credit arrangement ever. I think it's unfair and unrealistic to limit to 3x salary, especially for us single people with no joint income!

Cozworth806

Am actually worried that C&G will be forced to withdraw their offer to me on a house that we are likely to complete on next week.
We are borrowing 4 times our salary on a property than is less than the rent we are paying, but agree that it could mean a huge drop in mortgage availability.
(We are paying £160k, but would need to drop that to £130k to fund it at 3 times)
It might seem sensible but frankly it will mean that it would be certain that house prices could drop another 20%+

lynzpower

It is pretty certain that property is likely to drop another 20% so I think this dovetails in with it quite nicely.

Personally, i'm in favour of it, very much so. It will bering the vlaue of properties down, and I believe that is the right thing ( im in central london so my view is probaly rather warped) i know of someone who got 6x her income interest only on a one bed flat above a shop. Not being funny but that should never have been allowed to happen and there is no chance this side of eternity the flat is going to be worth what she has paid for it.

Gorgeous_George

Prices will fall so that most borrowers can get a mortgage (a sensible mortgage at that!).

It was the lack of nanny states that brought the financial world to it's knees.

GG