Abbey to offer 5 x salary mortgage

worldtraveller

Abbey, Britain's second largest home loan provider, is offering borrowers five times their salary in order to help them get onto the property ladder.

http://news.bbc.co.uk/1/hi/business/6104522.stm

wymondham

when others follow suit does this now mean that house prices will rise faster ?? All seems crazy to me - how long until 6x, 7x etc... - don't we need the bottom rung of the ladder to dry up to make prices return to a sensible state?

People must be crazy to buy at these rates...

Tustastic

Wouldn't it be better to offer people longer mortgage terms, so the monthly repayments were affordable in the early years?

wymondham

ultimately must be best if people simply don't buy, then prices have to come down.... everybody benefits then (except those who purchased at monopoly amounts).

talksalot81

Not buying is great if you already have somewhere to live. As a first time buyer I do not want to live in someone elses house. I earn a good salary and see rent money as simply wasted. There are going to be alot like me and I suspect many already on the ladder would say the same were they in our situation.

matto

This doesn't seem like something for first time buyers. To meet the minimum requirements you need £80k deposit to buy a £330k house. I don't know many FTBers in that situation. Most likely this will appeal to those looking to upgrade who have that amount in equity, or, heaven forbid, MEWers funding a BTL mortgage.

payless

Its a matrix, of 30 different situations - that takes into account

Credit score rating
Income Levels
Sole or Joint

range is from 3.1 to 5 X , does not take into account all income types, deduction needed for other commitments , PLUS a final affordability check

zag2me

25% deposit, and need to earn over 50k jointly.

The majority of people wont qualify for this offer.

Martinslovechild

wymondham wrote:

when others follow suit does this now mean that house prices will rise faster ?? All seems crazy to me - how long until 6x, 7x etc... - don't we need the bottom rung of the ladder to dry up to make prices return to a sensible state?

People must be crazy to buy at these rates...

Unfortunately, according to figures on the Nationwide Building Society website, the average salary multiple required to purchase a house for first-time buyers is now 5.0. It's slowly been creeping up from 2.1 in 1996 and has risen from 3.0 to 5.0 in the last 4 years alone.

In some parts of the UK, the figure is actually much higher - 6.4 in London for example. Bear in mind that when London previously hit a multiple of 5.0 (in 1987), it hit a high of 5.8 some 18 months later, crashing back to 3.1 just 4 years after that.

Whichever way you look at it, the housing market operates on a cycle, always overshooting the long-term trend, followed by a crash, followed by an undershoot, followed by a return to trend, and then repeating the cycle again.


This diagram shows house prices with inflation removed from the equation to show us the underlying (or 'real') average house price across the UK. Anybody who says we're not currently in a bubble ought to eat their hat!

UK007BullDog

This is such old news with the 5 x income mortgage. Dont know why the media is going crazy about it.

The 5 x income has been around for many many months with other lenders.

There are some even going as high as 10x. Depending on jobstatus and income.

TEDDYRUKSPIN

Don't even know why the media is getting fully wound up or promoting abbey for? As above, 5X is old news. Some banks are offering 8X!!! You know who you are! At the end of the day, think small before you think BIG! Otherwise you will regret it!