Proposed mortgage cap 'suicidal' say 'property experts'

Radiantsoul

Kenny4315 wrote: »

Why would construction improve ??

Why would house builders build houses, developers develop, etc if there is no profit to be made ? Which will be the case if a 3 X salary cap was enforced. There in the sh*te now so why would a correction beyond the proper market correction make them in become profitable ?? As a result who would make up the long term housing shortfall ?? Don't say the government, they'd be in enough Sh8te as billions/trillions of bad debts hit them via the nationalised banks.

Exactly. The boom in housing and construction may have been overblown, but it seems there is still plenty of demand for homeownership. It seems odd to restrict domestic construction; the likely outcome of which might be lower cost mortgage elsewhere in Europe as excess savings funds chase higher returns.

Really2

overlander wrote: »

. I do see where your coming from but people who can save massive amounts will be a minority so no major overall effect.

But for how long? if you start a saving culture the "have it now" like you said will become focused on saving to achive their goals.

Yes it would help the current people with deposits but given everyone is having to save at least 15% to get a mortgage at the moment by the end of this year their could be a lot of people with £20K-£50K in the bank as a deposit.

price inflation from competition is an unstopable force you can delay it (like this mesure would for a short time)
But it would still come back as savings would fuel HPI.

Also what would the banks do with all this saved cash with no one to lend it to? That scares me.:eek:

Really2

dopester wrote: »

That isn't a deposit.

£25Kpa x 3 and a bit extra = enough to buy outright on a nicer home in a nicer area. :rotfl:

I wouldn't count on their being a big ratio of buyers sitting ready with such high "deposits" available to them.

(Also I bet if you wanted to live in the sticks up north £100K would:))

I Agree but I am talking of the future not now.

Moving the goal posts will only help those with good deposits now.

I know rampant HPI is not good but I can not see how this would curb it either. It would lead to deposits and house prices like china.

edgex

Really2 wrote: »

You miss my point if houses did come down to 3X salary people would have more disposable income.

So yes they have saved but again thouse who can save faster and longer than others will push the price up and up.

The average FTB age I think would increase as 50% deposits may be needed to get a property as you will be competing with every deposit out their for property.

It happened with mortgages why the hell does anyone think it would be any different with a "savings culture"

Like I said look at China.

more disposable income does not automatically mean that people have/are saving bigger deposits.

just look around at the people that you would consider to be on a good income, & how many of them have got not just a mortgage & a car loan, but also a loan for the 2nd car, take out loans for expensive holidays, new tv's etc.
that money is not going towards a deposit.

if the mortgage payments were reduced, how much of that saved would go for paying those things that are currently borrowed on?
im betting most of it.


i save money, i dont buy 'new shiny things', i have no borrowings
i saved up to buy a new tv, when the old one got to the point of needing to be replaced. yet there are loads of people that would be putting a £350 tv on a credit card.

& even with doing all that, i cant afford a property.


if mortgages were only at 3x with max 90%ltv, house prices would have to follow.
i could then afford somewhere.
i could then also afford to continue saving up to buy 'big ticket' items

with all of that, we as a country would have a lot less unsecured debt floating about.
at some point in time it will have to be paid back, or are we expected to bail out that as well next?

Really2

edgex wrote: »

more disposable income does not automatically mean that people have/are saving bigger deposits.

just look around at the people that you would consider to be on a good income, & how many of them have got not just a mortgage & a car loan, but also a loan for the 2nd car, take out loans for expensive holidays, new tv's etc.
that money is not going towards a deposit.

if the mortgage payments were reduced, how much of that saved would go for paying those things that are currently borrowed on?
im betting most of it.


i save money, i dont buy 'new shiny things', i have no borrowings
i saved up to buy a new tv, when the old one got to the point of needing to be replaced. yet there are loads of people that would be putting a £350 tv on a credit card.

& even with doing all that, i cant afford a property.


if mortgages were only at 3x with max 90%ltv, house prices would have to follow.
i could then afford somewhere.
i could then also afford to continue saving up to buy 'big ticket' items

with all of that, we as a country would have a lot less unsecured debt floating about.
at some point in time it will have to be paid back, or are we expected to bail out that as well next?

Easy credit spend instead of save was the thing for the last decade.

If you change it to save instead of save do you think people will stop wanting to own a house and still spend all their money and live with mom and dad forever?

Or would they just save like the mortgage market demanded? (like now)


I think you are missing the point on what I am saying but like I said a good example of this is CHINA (again)

Conrad

It won't happen.

Imagine all the people wanting to port thier existing mortgage to a new property that borrowed over 3 x income - they wouldn't be allowed to move - what if they had a baby on the way and needed space - what if thier job had moved or they needed to be close to an ailing parent?

What about those that want to remortgage to a better rate that borrowed more than 3 x income, which I would say will be at least 50% of all borrowers.

What about the single spinster that is careful with money. She feels she can afford 5 x income as she has no kids, doesn't go abroad etc. Why should her aspiration to buy a property with enough land to grow an orchard be denied?

My old neighbour used to let some of her rooms. She had to borrow 6 x income as lenders would not take the rental income into account, but in reality she was borrowing a much lower multiple of her true income.

I can see the benefit of us all having lower mortgages but there would be many unintended consequences.

Really2

I think as savings culture is just as bubble inducing as a 100% mortgage culture you just delay it.

Affordability is the best way.

1) It rewards those who have no debt
2) It rewards thouse who have big deposits but low income
3) It stops fraud.

if it was just 3X income you could get a £25K unsecured loan for your deposit if you were desperate! how stupid would that be.

I think afordibility is the key and the sensible lenders HSBC etc already use a lowish multiple and will increase it if you show you are a safe bet (no debts).

overlander

Really2 wrote: »

I think as savings culture is just as bubble inducing as a 100% mortgage culture you just delay it.

Affordability is the best way.

1) It rewards those who have no debt
2) It rewards thouse who have big deposits but low income
3) It stops fraud.

if it was just 3X income you could get a £25K unsecured loan for your deposit if you were desperate! how stupid would that be.

I think afordibility is the key and the sensible lenders HSBC etc already use a lowish multiple and will increase it if you show you are a safe bet (no debts).

Maybe wrongly i just assumed that the 3x was the max and any other debts would reduce the amount you could borrow.

dgl1001

this will not happen over the long term - its a joke. REASON - if people can't access open market housing, they will have to find council accommodation, which is already over stretched. Restricting the accessibility of housing is not a new principle and has already been debated in government. The government can't afford to house even more people, which this stupid policy would help do.

edgex

but for most of the past mortgages were at ~3x multiples
they were not at 4/5/6x multiples

the economy was working then, wasnt it?


my figures from another thread:
Median wage in UK ~£18k
3x mortgage = £54k
@90% = £60k property price
so i would expect a single person to be able to get a 1-bed flat in an ok'ish area, probably in a city, for that £60k

so someone on £18k a year (before tax) would need to save up a deposit of £6k
plus all the fees
plus furniture
so lets say £10k

well after tax, take home pay ~£12k
so if they spent no money at all, they could save up enough in 1 year.
but people do spend money
lets assume they save 1/2 of what they earn
it will take them 2 years to save up enough money.

is it really unreasonable for someone on a median wage, & after 2 years of saving, to be able to afford a 1bed flat?

dont forget, that for the economy, we want that person to continue spending a large portion of their income on 'consumables' & other mass produced items.
if they had to save a £20k deposit, & have a 4x mortgage, well theres then less money to be spent in the rest of the economy.