3 times salary! How ridiculous!

ninky_2

I'd like to see mortgages banned altogether. I think you'd find most of us would be able to save up to buy a house outright in such a system.

co123456

I welcome the 3x salary move. Take it, or leave it.... it's time to realise that no one has the right to obtain credit.

lostinrates

LOL, looks like some of us escaped from our House Prices board!

It might interest people who frequent this board but not the HP , Economy and recession board that there is lots of discussion of this over there and interesting opinions from both sides of the fence.

And generally we behave ever so slightly better than before....so far today anyway

sapphireeye

leveller2911 wrote: »

I checked property prices in my area on www.ourproperty.co.uk which covers prices from 1997-onwards it was interesting to see the average house price consistantly rose 300% over the last 10yrs.
Given that wage rises rose around 25% in 10yrs its no wonder we are in so much trouble.Its was unsustainable and couldn't last.

Oh and this isn't spam, the link has been posted on here endless times.:D

Slightly off-topic but thanks for posting this! A real eye opener for someone like me who's just starting to think about the future and buying my own place someday. A flat in the same block as I keep looking at sold for £22,500 in 1995, £30,000 in 1998, £125,000 in 2004 and £140,000 in 2008!

I don't know why I'm surprised though, I was talking to my dad the other day because some flats in the same block as where he bought his first flat 30 years ago are for sale. He bought his for £13,000 on a £10,000 a year salary (he did say that this was quite a decent salary back then), whereas now they're selling for £140,000 and I only earn £20,000

As for the 3x salary debate, I'm not going to get into that too much. Round here (south-east) I wouldn't be able to afford anything on that (maybe a house boat if I was lucky ) but I maybe could if I were to move elsewhere. Unless the prices do come down that is!

prowla

The point is that house prices have spiralled out of control because (a) people wanted to buy homes, (b) people were prepared to pay way too much, (c) interest rates have been low, (d) lenders were prepared to lend way too much.
Well, that's over, at least for a while, but hopefully forever.

Doozergirl

PasturesNew wrote: »

What if the OP has a heart attack from doing 3 jobs and everything else ... leaving them unable to work at all and the partner has to give up work to be a carer/look after the kid.

At 3x salary, you've got more chance of being able to cover that around the changed circumstances. Especially 5-10 years down the line.

Suitable life and critical illness cover. Something everyone needs to consider.

bob79

My main problem with a blanket 3 times salary maximum is that it reduces my options in how I want to live my life.

Very much simplified, people have the following two options:
1) Buy a house close to work. Financial upside: saves the cost of having a car. Financial downside: house will be expensive.
2) Buy a house in the sticks. Financial upside: house will be cheaper. Financial downside: will need a car.
The average household spends almost as much on a car (acquisition, petrol, insurance, maintenance...) as they spend on their mortgage, so needing a car or not makes a huge financial difference.

Nowadays somebody who really wants to live in an urban area can decide to spend more money on the house instead of on a car and in that way outbid somebody who earns more, but cares less about living in an urban area. If a blanket 3 times salary maximum is instated, then the government forces these people to spend less on a house then they want (and can afford) and they can not outbid the higher earner. So they will have to move to the sticks (and be forced to get a car and be financially no better off).

This is what happens if you interfere in markets in a stupid way: it's called suboptimal allocation and on the balance, we are worse off.

Of course, the urban dweller could rent an urban house instead. In that way he could avoid the restrictions put up by the government. If no restrictions are put on BTL mortgages, then you could buy a house and rent it out and rent the house owned by the person who rents the house that you own...... or you could set up a company that you own and from which you rent your house....

If the government does cover these loopholes, then properties would be bought by rich people just above what ordinary people could get on the 3 times salary rule. They would then rent it out to these ordinary people at the higher price that these people are actually willing to pay (but not allowed to pay by government regulations) and the rich would make enormous profits.

This is another lesson about interfering in markets: people will play it to their advantage. The more rules, the more loopholes, the more money the rich squeeze out of the ordinary person.

If the government wants to something about the mortgage market, then there are better options.
1) Force banks to offer long term fixes (up to the term of the mortgage). It's crazy that most banks don't offer fixes for more than 5 years.
2) Replace fixed early repayment charges by early repayment charges that depend on the difference between the fixed interest rate and the currently available interest rates. That makes it impossible for rate tarts to profit from changing deals all the time (what the early repayment charge supposedly seems to be for). But it doesn't punish people who for some other reason want to get rid of their mortgage (e.g. due to divorce, unemployment, moving into a care home, moving abroad). Now these people would have to pay a hefty early repayment charge even if the current interest rates would be higher than the rate they pay on their fix!
3) Demand a collar on tracker mortgages (both up and down). This allows people to speculate a bit on interest rates, but not so much that they would inevitably get into trouble. It would also prevent banks having to stomach interest rates on trackers of 0% like some have to now. So it prevents stupid decisions on both sides.

poppysarah

But we all live our lives differently. If you earn shedloads then save it and then you can buy a bigger house with still a 3X mortgage.

Anyone who thinks they can afford a more than 3X mortgage should save like a looney and then they might not need one at all.

Woby_Tide

Not arguing whether 3x is a valid multiple or should be lower but I think the multiple system is yet another bad thing about mortgage markets. Affordability and earning power are two seperate measures and no guarantee of anything. Just because someone earns £x doesn't make them capable of budgeting or living within their means whereas a lower earner with a much better personal fiscal policy and awareness of their limits would be punished due to their actual earnings.

An arbitary finger in the air 3x (or even 2.5x/1x partner) is just as much guesswork as the 7x etc. as it still misses countless other important factors

poppysarah

Punished because of their actual earnings?

No. Buying a house isn't for everyone. It shouldn't be a right. It should be something to aim for, a reason to work hard at school, a reason to keep educating yourself and improving your lot.

There should be major provision of social housing - good quality, low cost, secure tenancy housing for anyone who wants it. There should be none of the rush to get away from dodgy landlords and poorly maintained properties.
Housing is a right under the human rights. Nowhere does it say everyone should own their own home.