Likely effect of the stamp duty elimination on house prices

Graham_Devon

He isn't right, hence my first post where I asked when did lenders start lending multiples on deposits and thrugels post.

If I earn 30k a year, and the mortgage provider is happy to offer me 4x earnings, they will lend me £120k.

If my deposit is 30k, I can afford a £150k house. £120k loan and 30k deposit.

With the reversal of stamp duty, the 1k I would have paid (for instance) in stamp duty just means I can afford a house at 151k. £120k laon, and 31k deposit.

The lender doesn't say "oh, you now seem to have a further 1k income a year sir as you don't pay stamp duty".

Wages remain the same 30k, whether I pay stamp duty or not. Therefore, the loan they will offer me stays the same.

nearlynew

HAMISH_MCTAVISH wrote: »

Since forever..... A larger deposit increases the size of loan eligibility, as for most people saving the deposit is a bigger hurdle than the LTI ratio.

Example:
Previously: Savings of £20K for deposit + £2K for stamp duty......
90% LTV, 10% deposit, = £180K mortgage, £20K deposit, and total purchasing power of £200K

Now: Savings of £20K for deposit, + £2K no longer needed for stamp duty, so deposit of £22K. 90% LTV, 10% deposit, = £198K mortgage, £22K deposit, and total purchasing power of £220K.

You can now borrow another 18K, based on an extra 2K deposit at 90% LTV.

That's great.

But what you and your fellow HPI cheerleading debt-junkies don't get is that the extra money should go towards buying a better house not the same house for more money.



F*cking muppets the lot of you.

ukcarper

Thrugelmir wrote: »

A slight flaw in your calculations.........

Mortgages are calculated on borrowers incomes not their deposit as a % of the property purchase price.

I begin to understand now why you ramp up house prices. As finance obviously isn't one of your stronger subjects. :beer:

I'm afraid it's both

HAMISH_MCTAVISH

Thrugelmir wrote: »

A slight flaw in your calculations.........

Mortgages are calculated on borrowers incomes not their deposit as a % of the property purchase price.

I begin to understand now why you ramp up house prices. As finance obviously isn't one of your stronger subjects. :beer:

Oh don't be so dense.....

I expect Graham to have missed it when I said...

as for most people saving the deposit is a bigger hurdle than the LTI ratio.

But you really should know better.

A couple on 60K a year can easily afford to be looking at 200K+ houses based on LTI. Saving a 20K to 60K deposit however, is a far bigger restraint on their purchasing ability than the upper limits of LTI.

The reality is that in the real world, the vast majority of FTB's will run into deposit size limits long before they run into maximum LTI limits.

That extra 2K will make a big difference in purchasing power to most FTB's.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Oh don't be so dense.....

I expect Graham to have missed it when I said...



But you really should know better.

A couple on 60K a year can easily afford to be looking at 200K+ houses based on LTI. Saving a 20K to 60K deposit however, is a far bigger restraint on their purchasing ability than the upper limits of LTI.

The reality is that in the real world, the vast majority of FTB's will run into deposit size limits long before they run into maximum LTI limits.

That extra 2K will make a big difference in purchasing power to most FTB's.

And your calculations about the extra lending on the stamp duty saving?

As that is really what thrugel was picking up on.

HAMISH_MCTAVISH

Graham_Devon wrote: »

I guess thats Hamish out of this conversation. LOL. Same !!!!!!, different day.

How do you manage to be so staggeringly wrong so very often, and still come back for more?

You're a masochist Graham, there's no other explanation.

HAMISH_MCTAVISH

Graham_Devon wrote: »

And your calculations about the extra lending on the stamp duty saving?

As that is really what thrugel was picking up on.

Good grief Graham, what on earth do you think I was just saying?

The deposit size will be increased by not having to pay stamp duty.

Increased deposit size means more lending available, for the vast majority of borrowers.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Good grief Graham, what on earth do you think I was just saying?

The deposit size will be increased by not having to pay stamp duty.

Increased deposit size means more lending available, for the vast majority of borrowers.

That's no where near what you said.

If the salary has not increased, how are you turning a 2k stamp duty saving into 20k extra lending?

You can't is the simple answer. The loan on their income remains the same whether they had 1, 2, or 10k extra in their deposit fund.

So tell me how you turn 2k into 20 please. Or is this something else that only happens in Aberdeen and you simply cannot question it

We are all VERY clear on the deposit fund having an extra grand or two in it. No one has actually questioned that.

Emy1501

The vast majority of FTB's borrow the money from the bank of Mum and Dad who probably have little problem finding the extra 2k for a deposit if necessary. Therefore as usual Hamish's theory is nothing more than a pipe dream.

The only beneift would have been thought of people buying now in the belief that it would be withdrawn in 21 months time. The fact the its a Conserative policy anyway means it wont be withdrawn so will have little effect on prices.

ukcarper

It depends what is the limiting factor they might earn enough to borrow 220k but if they only have 20k deposit and the most anyone will lend is 90% they can only borrow 200k not the £220k their salary would let them borrow with the extra £2 they can borrow the £220k.