Are the mortgage lenders being irresponsible?

dopester

chucky wrote: »

to be fair - i wouldn't be asking for advice on this part of the forum but in answer to your question. the banks/lenders are not being reckless; the final decision is yours.

Exactly. The decision is yours, assuming you qualify all the criteria for any home you want to buy. The decision is yours as to whether you borrow the money required to buy a apartment/house at current market levels.

Keep in mind... you're on good money and you can see the struggle with income/mortgage - to life costs, just for an FTB style of house. How much do you both need to go on to earn to ever trade up from an FTB style of house like people did before you?

I'm not entering the market as a debt-slave, to buy a FTB slavebox, to support the house prices of older generations with highly valued homes.

This report came out before the recession/depression began - when there were still lots of jobs to be had in the market, and fewer people being made redundant, big pay-cuts ect.

Nation of mortgage slaves among Britain's young couples
By BECKY BARROW
Last updated at 10:55 30 May 2007

With housing prices soaring to unprecedented levels, many young couples have been reduced to 'bonded labourers' in a 'modern day slavery', the shocking report has claimed

The bleak report by academics - called On The Treadmill - says "super-size" loans are pushing soaring numbers of parents to desert their children in order to work long hours.

Many are taking on second jobs to pay a mortgage which could be up to seven times' bigger than their salary.

The warning came as figures from the British Bankers' Association showed the average home loan is now a record-breaking £152,800 - compared with £50,000 in 1994.

With a £150,000 mortgage, the monthly repayments are about £1,100, or 75 per cent of the take-home pay of a worker on average earnings.

Many buyers in the South, however, have to borrow more than double this amount, with average asking prices of nearly £400,000 in the capital.

The report, from the universities of Aberdeen and Loughborough, claims many young couples are being turned into "bonded labourers" by their mortgage.

This is someone who works to repay a loan, typically trapped into doing excessively long hours for little money.

Dr John Bone, a sociology lecturer at Aberdeen, said: "They are like bonded labourers because they are so heavily indebted.

"For these young homeowners, the burden of mortgage debt will place great stress on those who have families.

"Both debt-harassed parents are forced to work increasingly long hours to meet the payments.

"Little time will be left for family life and little disposable income with which to enjoy it."

...continues here (Daily Mail article)

HellsGranny

Also bear im mind that the mortgage rate has hit 15% before now, and that's no joke unless you're earning oodles.

Cheers, HG

Spartacus_Mills

bubblybee wrote: »

Hi all,

I'm not sure if this has been discussed here recently so apologies - please direct me to the thread.

We are FTB and have a joint income of £42K a year (gross). We have just received a mortgage in principle for 4.5 times our salary £189K. I'm not sure what the monthly payments would be on this but it would be well over £1000. We are currently paying £600 rent and £500 into deposit savings. We really don't have any money leftover at the end of the month, have put everything on hold, haven't had a holiday etc. What I don't understand is, and perhaps I'm missing something, but this seems unaffordable and not something we could long term do - not with saving to have children etc. Are mortgage companies still lending too much?

Now our IFA clearly says he doesn't recommend us getting this level of mortgage and in any case we were thinking of £150-£160 with a 10% deposit. He says that this amount simply reflects our good credit score.

What does everyone think? are mortgage companies still offering to lend too much?

I think that you are mistaken. Hamish told me in a thread that houses have never been more affordable. You need to look at your figures again.

purch

We really don't have any money leftover at the end of the month, have put everything on hold, haven't had a holiday etc

Take on that Mortgage and that's what you will face for the next 25 years :eek:

bubblybee

Hi All,

Thanks for the replies. I really wasn't seeking advice on taking out that level of mortgage - it was a starting point for a discussion.

I feel that I am responsible and know that to save for children etc we couldn't afford that level. I was really using my situation to illustrate that to me the £189K amount seemed rather high and I think people, some people, would be tempted by that. For info though this is based on 90% mortgage.

So my point was while I think there is a responsibility of the mortgagee, I think I had expected some restrictions on what is being considered affordable - given what has happened over the last two years to the economy and banks etc.

I was just curious what other people thought.

Spartacus_Mills

bubblybee wrote: »

Hi All,

Thanks for the replies. I really wasn't seeking advice on taking out that level of mortgage - it was a starting point for a discussion.

I feel that I am responsible and know that to save for children etc we couldn't afford that level. I was really using my situation to illustrate that to me the £189K amount seemed rather high and I think people, some people, would be tempted by that. For info though this is based on 90% mortgage.

So my point was while I think there is a responsibility of the mortgagee, I think I had expected some restrictions on what is being considered affordable - given what has happened over the last two years to the economy and banks etc.

I was just curious what other people thought.

On the plus side your salaries should increase over time (although don't expect it in the next 2-3 years) so the mortgage becomes less of a burden.

On the minus side interest rates are bound to go up in the future.

You will struggle to start with but it will get better.

I think there are as many advantages and disadvantages to home buying and renting so you need to do what is best for your situation.

I have to say it is a rather damning indictment of you that you do not appear to know from the original post what the mortgage payments are going to be.

bubblybee

Spartacus_Mills wrote: »

On the plus side your salaries should increase over time (although don't expect it in the next 2-3 years) so the mortgage becomes less of a burden.

On the minus side interest rates are bound to go up in the future.

You will struggle to start with but it will get better.

I think there are as many advantages and disadvantages to home buying and renting so you need to do what is best for your situation.

I have to say it is a rather damning indictment of you that you do not appear to know from the original post what the mortgage payments are going to be.

Hi Spartacus, yes I think think we all need to balance the issues that affect us - we all have different contexts that affect our decisions.

doire_2

bubblybee wrote: »

Hi all,

I'm not sure if this has been discussed here recently so apologies - please direct me to the thread.

We are FTB and have a joint income of £42K a year (gross). We have just received a mortgage in principle for 4.5 times our salary £189K. I'm not sure what the monthly payments would be on this but it would be well over £1000. We are currently paying £600 rent and £500 into deposit savings. We really don't have any money leftover at the end of the month, have put everything on hold, haven't had a holiday etc. What I don't understand is, and perhaps I'm missing something, but this seems unaffordable and not something we could long term do - not with saving to have children etc. Are mortgage companies still lending too much?

Now our IFA clearly says he doesn't recommend us getting this level of mortgage and in any case we were thinking of £150-£160 with a 10% deposit. He says that this amount simply reflects our good credit score.

What does everyone think? are mortgage companies still offering to lend too much?

You would be crazy to take it. Dont you want to have some kind of life too?

ukcarper

Another way to look at is what is the rent for the same kind of house

julieq

The lender is taking a measured view of risk having taken into account all the factors the bears are frothing about. They know their default rate. It's an offer to a borrower, no-one is obliging the borrower to take it if their priorities are elsewhere.

And the affordability questions ignore inflation and changes in circumstances such as promotion and other wage increases.