A quarter of home owners live on 'financial precipice'

carolt

I do think it's likely that those who inflated their income ended up with a mortgage that is too expensive for them, yes.

Isn't that common sense?

And that was too expensive for them from the start - let alone if any unforeseen events occur.

silvercar

I think its more likely that the unforeseen circumstances are what tip people over the edge.

If someone knows they have a good career path ahead of them, with major pay increases, then inflating their income will not cause grief. eg doctors or lawyers, or those that come from rich families who know that the family will always bail them out. Whereas an ordinary couple in ordinary jobs, suddenly hit by an unexpected pregnancy or divorce won't have a fallback position.

Graham_Devon

Hmmm. Nobody know what lies ahead for them in the future, which is why it's so silly to inflate your income to start with. It's merely a gamble.

Those that have a rich enough family should not neccesarily need to inflate their salary in the first place. If their parents are always going to help them out, as you stated, they would help them from the start. It's unlikely rich parents would force you to struggle and lie about your income, only to bail you out later. They'd just help from the start and make it easier for you from the start.

Mr.Brown_4

carolt wrote: »

I do think it's likely that those who inflated their income ended up with a mortgage that is too expensive for them, yes.

Isn't that common sense?

And that was too expensive for them from the start - let alone if any unforeseen events occur.

rewired thanked this. And boy should he know about living beyond your rather average means. Shame really, the fool thought HPI would last for ever. Just keep borrowing eh 'rewired', until it all works out for you?

Emy1501

Firstly, it looks like interest rates are going nowhere fast

Yep you maybe right but at least one business group says they could be 2% by the end of the year so 3% within the next 12-18 months is not impossible.

Secondly most SVRs are around 3.5-4.5% and banks are making plenty on these. You may be referring to the older base rate trackers (many of which were fixed term and have now ended) or those on the 'base + x %' deals that kicked in after certain fixed term mortgages expired. I don't think that these account for vast swathes of the mortgage market - quite the opposite in fact

Not everyone is on one of these SVR. Many NW, Lloyds/HBOS customers on 2.5% mortgage deals. Many BTL Landlords are on these deals with Mortgage express etc. You only need a few % to start to struggle for effect to take place. We saw this in 2008. The vast majority had little problems paying their mortgages but prices fell fast. I don't anyone who was struggling badly to pay their mortgage in 2008. I know a few who were treading water but none who were at a stage where they were being forced to sell

Thirdly if rates rose to say 3.5% and some banks started trying to charge 8-9% you would probably find those lenders less affected by the credit crunch (ie HSBC) stealing their custom by setting mortgages at a level more similar to 2005-7 when rates were typically 1% or so over base.

I suspect you are right for the many but as I have said above it only takes few % to struggle to cause problems. HSBC and others will not be interested in people with less than 10% equity which will exclude many first time buyers between 2004-2007 and also their rates for these people are not great. Also all those who bended the truth about income, Self cert, suspect credit etc will not be accepted. Personally I dont think too many banks will have SVR's under 3% below base rates in the future and for the very good rates like you are implying will only be offered to those with equity of 25% and above.

Finally, many of those on low deals or low SVRs will probably have been overpaying far more than they would have otherwise done (I know I have!) as such the overall effect of rate rises will be softened.

Just an alternative POV

Again you may be right but this is not my experience of people on these low SVR's.

Really2

carolt wrote: »

I can't see any reference in the article to average salaries needing to fall by 20% - I'm not sure what you base that on.

£300 income + 33% (Tax and NI) equates to nearly £5K PA, average wage is £25K so £20% of the average wage.

I suppose the other way of looking at it is.


26% Of 35-44 year old home owners can save up to £300 per month.:T

74% can save more than £300 per month.:T

Not sounding that bad is it now .

Graham_Devon

Really2 wrote: »

£300 income + 33% (Tax and NI) equates to nearly £5K PA, average wage is £25K so £20% of the average wage.

I suppose the other way of looking at it is.


26% Of 35-44 year old home owners can save up to £300 per month.:T

74% can save more than £300 per month.:T

Not sounding that bad is it now .

That would require everything around us to stay static.

No pricing of other items could change. Fuel could not increase. Tax could not increase. Food could not increase. The kid couldn't require a new uniform. The car couldn't have a problem. You couldn't pay for a couple of new tyres to replace the worn ones. You couldn't allow yourself to get into a situation where you may need a new washing machine etc etc etc.

In other words. Damn stupid post.

Theres blind optimism, and there is downright ignorance of life. That post fell into the later I'm afraid.

Mr.Brown_4

I think quite a few people have lost 300 a month easily with short time working, loss of bonuses and overtime, etc. And a sad number have lost all their income completely.

Is it a double whammy - less income combined with restrictive lending?

And lurking under all this is the small matter of the biggest bubble ever in the history of UK house prices.

Now common sense tells me one thing. What does it say to those of you who have not got an iota of intelligence?

Really2

Graham_Devon wrote: »

That would require everything around us to stay static.

No pricing of other items could change. Fuel could not increase. Tax could not increase. Food could not increase. The kid couldn't require a new uniform. The car couldn't have a problem. You couldn't pay for a couple of new tyres to replace the worn ones. You couldn't allow yourself to get into a situation where you may need a new washing machine etc etc etc.

In other words. Damn stupid post.

Theres blind optimism, and there is downright ignorance of life. That post fell into the later I'm afraid.

Oh Graham but it is at least factual based on current conditions and information given. (the bold bits I would say are every day costs and included in the survey)
But if you do want to talk of the future you miss out wage inflation.
It more likely to hold true than all of the people all having there income cut by £300. A fact everyone seem to miss for the survey to hold any weight.

Now your post is damn stupid

ps the post was an ironic look on how people make out that 26% of all mortgages will now default on the information provided. It is easy to make a leap to far if you are a fool. I was mearly highlighting what stupid asumptions people have made with the info.

Graham_Devon

Really2 wrote: »

Oh Graham but it is at least factual based on current conditions and information given. (the bold bits I would say are every day costs and included in the survey)
But if you do want to talk of the future you miss out wage inflation.
It more likely to hold true than all of the people all having there income cut by £300. A fact everyone seem to miss for the survey to hold any weight.

Now your post is damn stupid

ps the post was an ironic look on how people make out that 26% of all mortgages will now default on the information provided. It is easy to make a leap to far if you are a fool. I was mearly highlighting what stupid asumptions people have made with the info.

Hang on....

I do not have to take into account wage inflation. Wage inflation, also, is not guaranteed.

Just look around you, and you will figure out why wage inflation should not be relied upon when inflating your income to buy an overpriced hutch.

Let's put it this way. I could rely on my wage inflation. I could say in April 2011 I will get a 3% rise. Woop......

....Then it snows. As we have seen, snow can change everything. My wage inflation may be at risk. I become stuffed.

I lose some of my wage inflation, which means I can;t afford the mortgage AND the roof has a sprinling of the white stuff on it, which has effected it's value, which has put me into neg eq.

You gotta think ahead really....