Vote on 3x salary mortgage cap

thegibdog

According to the BBC:

"The FSA's consultation paper, to be published in September, will look at various methods of regulating mortgages, including formal limits on either the LTV or LTI ratios."

Kenny4315

Whatever happened to business people making business decisions. On my last purchase, a derelict 4 storey house, I did a true self certification (no check on income at all, but my interest rate and deposit were higher ie less risk to bank if default), and my broker arranged the deal directly with the Business development mgr for the company concerned, who went through the details and rubber stamped it. I put down £100k on a £350k property, and spent a further £75k plus my labour and project management which reduced the cost from around a £200k estimate, if I had just signed the cheques. My income stream varies year on year, and my BTL's covered expenses of the individual BTL due to the fact I want along term gain, but at the time I had my previous main residence on the market paid, which I sold a few months after the completion for £324k.

If they had put this through a crazy 3 times salary formula then even though a few months later I had enough to pay off in full and I'd put over £100k down I'd have been refused a mortgage. The property has recently been valued at the £800k mark.

So it entirely stupid to employed business managers to make decisions and then have a one fits all lending policy regardless.

mitchaa

Why no 3x joint option?

3x singular is just plain stupidity and will definitely not get the green light. There is no sound basis for an argument of unnafordability on this figure.

Many people cope well with 4x/5x etc.

I suspect the vast majority of those who have voted 3x are not homeowners but people who are in rental hoping that they will soon be able to buy houses on credit cards.

Housing has never been cheap, and it never will be. Some people need to get out of la la land and wake up.

Buying is not a right, for those that cannot afford it, there are millions of council, social housing homes.

If housing becomes cheap down to levels of 3x £26k, then we better prepare ourselves for an even bigger boom next time round as BTL shoots through the roof with any families on decent incomes having multiple homes.

Graham_Devon

Really2 wrote: »

So why not an average. 1% as happened before not a good reason to use it thoug is it?

Because an average means that there has to be a period where the number is higher maybe?

No point saying they can afford it on an average interest rate, knowing full well that the only way that average was created was by having interest rates higher.

So they can afford it at average. Thats great, until rates go above average.

Its NOT your money. You are borrowing it. Therefore risk has to be taken into consideration. It really is that simple.

Graham_Devon

mitchaa wrote: »

If housing becomes cheap down to levels of 3x £26k, then we better prepare ourselves for an even bigger boom next time round as BTL shoots through the roof with any families on decent incomes having multiple homes.

No. Thats part of the point.

There would be not BTL boom as amateur landlords wouldnt be able to get the mortgage therefore they wouldnt be able to buy the property.

Only established landlords with proper cash in the bank would be able to purchase them under business guises.

The Wilsons would not stand a chance under this regulation. And a good thing too, considering they are basically bankrupts now costing us all.

Kenny4315

In all honesty if I thought a 3 X salary cap where to be enforced then I'd sell my BTL's before it became compulsory. Maybe I'd buy back at the bottom, but you'd have to rely on income gain and not capital gain, for me that's a new business model, and a totally new market.

izzybusy23

Cat695 wrote: »

I surely have some braveness in me. I just don't fancy being stupid with my money.

Fantastic quote!! :T

Ingsy

Gorgeous_George wrote: »

It's stupidity like that that has caused the problems.

If I borrowed money from you, how much you like me to owe you when I lose my job? £5,000 or £50,000?

Does it really not matter?

Some individuals have mortgage debt of £1M or more. It matters.

GG

So why not make the maximum lending 1x salary? Or even do away with mortgages altogether. "Want a house? Then save up and buy one..."

The fact is that there is always risk with any lending regardless of the borrowers salary or the amount that is borrwed. The point I was trying to make (probably quite badly) is that why is 3x salary such a good multiplier? Plus, I personally think that everyones circumstances are so different, that a one size fits all isn't the best way of doing things.

But then maybe that's why I don't work for a mortgage lender :beer:

Really2

Graham_Devon wrote: »

Because an average means that there has to be a period where the number is higher maybe?

No point saying they can afford it on an average interest rate, knowing full well that the only way that average was created was by having interest rates higher.

So they can afford it at average. Thats great, until rates go above average.

Its NOT your money. You are borrowing it. Therefore risk has to be taken into consideration. It really is that simple.

So overpaying in such times like now evens out the bad times.

[strike]You really [/strike] It really is that simple

Why do they not do 10 and 25 year morgages at 18% Graham:rolleyes:

IF 12% IR came in people would be geting 12%+ wage increases! It makes no difference.

penguine

The people on here opposed a 3x cap seem fixated on the idea that the banks are going to refuse to lend them money they think they can afford to repay. But how do you feel about the banks lending money to people who then can't repay it -- and we all get to pick up the bill in terms of higher taxes and increased bank charges etc?

I think the 3x cap is a clear example of closing the stable door after the horses have bolted, but it's still a good idea anyway. It should help to protect those taking out a mortgage now from getting into trouble once interest rates go up again (which they will).