Abbey - 5 times joint salary?

talksalot81

Something I noted on the other thread is that it is all fine and well if you have a property already. These are often the people ranting about how irresponsible it is. But many of these same people will have pushed themselves very hard when they started onto the mortgage trail.

So whilst I appreciate this is not really an FTB mortgage, those ranting about the multipliers should remember it is easy to speak when you dont have to worry about it.

AndrewSmith

Sorry bob,

AndrewSmith wrote:

but why is this the fault of a lender?

was not directed at you, merely a general retorical question :beer:

barnaby-bear

trickster wrote:

Just can't figure this out. Me and Mrs Trickster have a mortgage of 3.15 x my salary. She works part time after having our boys. I earn above average salary.

We find things tight enough on that!

How on earth would a couple earning £25k each afford the repayments if the mother gave up work to have children or one of the couple lost their job?

Would scare me silly being a slave to that scenario.

Yeah but when the rent is comparable to an IO mortgage, I'd rather be renting from the bank on IO than on 6 month AST, for a start a lot of ASTs don't allow children break the rules and just not renewed no reasons needed, you can't paint your kids bedrooms in rented... A two-bed round here is around £1k a month to rent, so you are scared sick all the time about what ifs anyway - go to the DFW board and at least you can delay the problem - a bit of living on CCs etc to make sure the mortgage gets paid etc, reposessions take months if not years... on an AST much faster....

Problem is too few houses being built for free market, all only 'affordable' for scroungers and the hopeless or executive (to pay for the cost of the afordable) and loads of nimbys objecting to building anywhere. If prices too high to buy you have to rent and if rents comparable to buying..... what is the choice?

MascaraMinx

I am one of these "irresponsible" borrowers being discussed on this thread, although we have a Northern Rock together product not Abbey. We are both well aware of the risks and implications of borrowing high joint multiple values (not quite 5x though) and we would not be doing it if we didn't feel we had to stretch ourselves in order to secure a future together. We can afford the repayments, and we are tightening our belts in order to make significant overpayments so that we can chip away at the capital. We have a fixed rate period so we know we can afford this for 3 years, and we are unlikely to be made redundant in our job sector or start a family. At the end of our 3 years, if the interest rates have rocketed, we will consider the affordability of it, but at least we will have built up significant equity in the property.

I am sorry that so many people feel that what we are doing is so terrible but from our point of view it is a necessary evil. I have always been brought up on stories of people suffering financially and stretching themselves to set their families up in the early years, and this is what I feel we are doing. I can see why it upsets people who are waiting to get on the ladder (I have been waitign long enough and finally given in), but those of you who already have properties are being a bit unfair IMO. I know a lot of you will disagree with my views and will read on with interest.

Alan_M_2

AndrewSmith wrote:

Exactly my point Bob, but why is this the fault of a lender?

Is it the fault of the mobile phone company that they sell a £450 unit that offers MP4, bluetooth, GPS etc etc, or is it the fault of the individual that buys it that he then realises he can't afford to buy food for the month?

People in this country are all too quick to blame others when in the majority of cases the blame lies a little too close to home for their liking.

Actually I think there's a moral obligation to have mechansims in place because a disturbinlgy large number of people really don't have a grasp on basic economics.

The FSA and associated governing bodies exist to protect the consumers from unscrupulous lenders, yet year after year they still manage to sneak products through under the radar.

I've had a conversation with my own bank manager along these lines, when I was considering buying 4 or 5 years ago, I went to apply for a mortgage, but as a self employed sole trader back then I didn't have the accounts from an independant accountant to back up my income to fall within the parameters of the product, so no mortgage.

I thought I'd try an experiment, so I left it a month and went back to the bank and expalined I'd decided I'd like a new car please and what I wanted was a brand New Range Rover Vogue, £80,000 could they sort out the finance for me please, my existing car would go as part exchange and the rest I want on a 3 year HP deal.

They looked at my accounts, said I clearly earned enough to cover the payments and although they thought it was a little excessive I could have it if I wanted.

The monthly payments on the Range Rover were double the mortgage I applied for.

I couldn't get a sensible explanantion out of my bank for the above, and never have done.

Alan_M_2

MascaraMinx wrote:

I am one of these "irresponsible" borrowers being discussed on this thread, although we have a Northern Rock together product not Abbey. We are both well aware of the risks and implications of borrowing high joint multiple values (not quite 5x though) and we would not be doing it if we didn't feel we had to stretch ourselves in order to secure a future together. We can afford the repayments, and we are tightening our belts in order to make significant overpayments so that we can chip away at the capital. We have a fixed rate period so we know we can afford this for 3 years, and we are unlikely to be made redundant in our job sector or start a family. At the end of our 3 years, if the interest rates have rocketed, we will consider the affordability of it, but at least we will have built up significant equity in the property.

I am sorry that so many people feel that what we are doing is so terrible but from our point of view it is a necessary evil. I have always been brought up on stories of people suffering financially and stretching themselves to set their families up in the early years, and this is what I feel we are doing. I can see why it upsets people who are waiting to get on the ladder (I have been waitign long enough and finally given in), but those of you who already have properties are being a bit unfair IMO. I know a lot of you will disagree with my views and will read on with interest.

Let me just pose this question:-

What if, in 3 years time, the interest rates have increased to say 6% and the value of your house has dropped back to what you paid for it, of maybe even less? I'm not saying it will but it's a possibiity.

MascaraMinx

We could afford that rate so we would remortgage for another 2 or 3 years. If it had risen to more than 7.5% and we couldn't negotiate a lower fixed rate, we would have to consider selling up, although this would be last resort.

AndrewSmith

Alan_M wrote:

Actually I think there's a moral obligation to have mechansims in place because a disturbinlgy large number of people really don't have a grasp on basic economics.

The FSA and associated governing bodies exist to protect the consumers from unscrupulous lenders, yet year after year they still manage to sneak products through under the radar.

I agree regarding unscrupulous companies however we are talking about Abbey, a mainstream lender offering a product to couples earning in excess of £50,000 per year. Without any dis-respect, a couple earning in excess of £50,000 should have a basic grasp on what they can afford each month.

There has to also be an acceptance of responsibility on the point of the borrower. After all a lender will go on what is requested by the customer.

I've had a conversation with my own bank manager along these lines, when I was considering buying 4 or 5 years ago, I went to apply for a mortgage, but as a self employed sole trader back then I didn't have the accounts from an independant accountant to back up my income to fall within the parameters of the product, so no mortgage.

Which proves that the 'filters' in this case were working.

I thought I'd try an experiment, so I left it a month and went back to the bank and expalined I'd decided I'd like a new car please and what I wanted was a brand New Range Rover Vogue, £80,000 could they sort out the finance for me please, my existing car would go as part exchange and the rest I want on a 3 year HP deal.

They looked at my accounts, said I clearly earned enough to cover the payments and although they thought it was a little excessive I could have it if I wanted.

The monthly payments on the Range Rover were double the mortgage I applied for.

A very strange experiment to try I must say bearing in mind that you will now have a record on your credit file of the application. You are comparing two completely different types of underwriting and, whilst I make no defence of their decision, would still suggest that any borrower in this position MUST take responsibility for their own actions. After all it was you who initiated the application and asked for the finance.

I couldn't get a sensible explanantion out of my bank for the above, and never have done.

They are a commercial enterprise who tried to fulfill the request of a customer. If the payments for something are not affordable no one is breaking your arm insisting that you must take it.

dfarry

MascaraMinx wrote:

We could afford that rate so we would remortgage for another 2 or 3 years. If it had risen to more than 7.5% and we couldn't negotiate a lower fixed rate, we would have to consider selling up, although this would be last resort.

Hi,

I'm not condemning you as I know that buying a home, and deciding when to do it, consedering all the variables etc. is extremely difficult. I sincerely hope it works for you and others in your position.

I am not a doom and gloom merchant, but I wonder what the snowballing effect of a house price crash might have. The mortgage market is very competitive but if business starts to dry up will the mortgage products be more or less competitive.

I'm not an economist but with increasing interest rates, I would have thought that banks would rather hold onto than lend their money and invest in emerging markets around the world.

Also I don't have a crystal ball but three years ago I thought it was unlikely that I would be made redundant - it happened and now I am unable to find a job that can pay me anywhere near the £46K per annum I was earning at the time. If it wasn't for the fact that we do have a low mortgage then I could have quite easily have been in repo. hell.

But... there are risks in most things we do... and sometimes the risks are worth taking so I do wish you well.

As a product I think this Abbey one will only appear to small number of people.... it's one for those that will have a fairly high disposable income and though I generalise will have good access or awareness to financial matters

meanmachine_2

A couple earning 50K must have some idea of what things cost?

Well, presumably a key criterion from the Abbey is sterilization of both partners.

I'm too dumb to work the stats, but what if one of them falls pregnant (I'm guessing the woman) and their salary halves to 25k?

They've borrowed the max of 250K, which magically becomes TEN TIMES salary.

Oh, and factor in a rise in IRs to 6%. WHat's the % of take home on that?

Not that Abbey cares. They have your 25% equity cushion.