Some lenders still offering 5x income multiples

mewbie_2

Kev09 wrote: »

I bet they all wish they had all stuck to just lending to the UK mortgage market...

What? Like Northern Rock do you mean?

ad9898_3

Kev09 wrote: »

I bet they all wish they had all stuck to just lending to the UK mortgage market.

I know the banking crisis didn't start here, but we were teetering on the edge of a cliff, with the slightest puff of wind we would be off. 6x,7x,8x + salary multiples, 125% mortgages, the BTL pyramid scheme, the list goes on....

The Americans may have 'pushed' us off the cliff, but we had climbed dangerously high and on the thinnest of ledges all by ourselves.

ukcarper

Kev09 wrote: »

House prices are determined by supply and demand, they do not necessarily have to reflect people incomes at all. Its the availabilty of credit which is reducing demand.

I do not feel you can say that house prices should reflect 3 x incomes, I mean there are so many other factors, if the price of bricks and cement quadrouple can you say that then, its not that simple. Why should an average house be worth 3 x an average income?

I'm not saying an average house should be 3x average income far from it even in the seventies when 3 + 1 x was strictly applied average house prices were a lot more that 3x average salaries. Just that if 5x mortgages are not available it would restrict the demand for FTBs properties of 5x +.

mewbie_2

It's all fairly simple. Dont buy a pile of overpiced crap with borrowings you can't afford.

ninky_2

mewbie wrote: »

It's all fairly simple. Dont buy a pile of overpiced crap with borrowings you can't afford.

Rent one off someone who has for even more money!

penguine

space_rider wrote: »

I kind of agree with you there, but one has to pay what the market value is and I don`t think it was just being able to borrow 5x that made houses go up so high. I think it was more people seeing houses as an investment rather than a home.

Most people I know bought their homes to live in. I think it was skyrocketing prices that made people start thinking of them as investments.

bdon

Kev09 wrote: »

If you read my earlier threads I have had to make this point over and over again. When the banks initially ran into trouble it had very little to do with lending in the UK mortgage market.

Defaults are rising in the UK now because of the recession we are in, but it is not this which caused any problems in the banking sector. Therefore I do not think you can say this "system" has failed so it isn't what happened.

The banks problem stem from mismanagement and complacency at the very top.

I bet they all wish they had all stuck to just lending to the UK mortgage market, then for instance RBS wouldn't have to write off £24bn from its balance sheet.

There is no point jumping on the bandwagon claiming how prudent they must be now. Affordability needs to be judged on each individual case, as has been mentioned before 3.5 x earnings means nothing if people have thousands on store cards etc, also if someone has been paying £900 rent for 5 years then it most likely they will be able to afford a £650 mortgage so they shouldn't be knocked back.

Hi, a couple of points I'd throw into the mix here:
1. NR was extremely "innovative" and was one of the 1st banks to start repackaging mortgages into MBS/CDOs
2. There isn't actually a shortage of housing in the UK - check Shelter site, google it, look at a map
3. The reason this particular credit-boom (and that's what it is, exactly like all the others going back 100s of years) is thorny, is that things have become global and intertwined on such a level that everyone is struggling with the complexity.

Our particular nation, the UK, could have cushioned ourselves from the storm but our elected (ahem!) government chose not to.

regards

Kev09

bdon wrote: »

Hi, a couple of points I'd throw into the mix here:
1. NR was extremely "innovative" and was one of the 1st banks to start repackaging mortgages into MBS/CDOs
2. There isn't actually a shortage of housing in the UK - check Shelter site, google it, look at a map
3. The reason this particular credit-boom (and that's what it is, exactly like all the others going back 100s of years) is thorny, is that things have become global and intertwined on such a level that everyone is struggling with the complexity.

Our particular nation, the UK, could have cushioned ourselves from the storm but our elected (ahem!) government chose not to.

regards

I pretty much agree with you here

1 - my point is that the actual act of giving out mortgages to UK citizens was fine, it was the bad management in allowing all the crap that went on afterwards which lost the money, not people defaulting on the mortgages giving out in the first place.

2 - Im no expert but there are some pretty bad examples of housing in the UK, people often aspire to live in the one area and the right house this is why you get demand spikes

3 I do not dispute this fact!

Kev09

ukcarper wrote: »

I'm not saying an average house should be 3x average income far from it even in the seventies when 3 + 1 x was strictly applied average house prices were a lot more that 3x average salaries. Just that if 5x mortgages are not available it would restrict the demand for FTBs properties of 5x +.

Ok it is a good point, if you can't get the credit there is only one way for house prices to go, I can't argue that!