Repo's up and some startling numbers

RenovationMan

shortchanged wrote: »

It was a comment about your statement saying that you are no better off now because your mortgage is NOW 4. whatever times your income compared to when you took out the mortgage it was 5 times your income.

Now would that be anything to to with 1) Interest rates have not changed since you took out the mortgage, therefore your mortgage payments are going to be exactly the same or lower (as you've overpayed) and 2) The general cost of living has increased therefore savings you've made by paying down your mortgage are being gobbled up by the extra daily costs of living.

Oh dear Mr shortchanged, you do so like to misquote and change the goal posts on a discussion in order to suit your argument! What I acually said was:

RenovationMan wrote: »

I was given a 5x single earning muliple and it doesn't seem to have done me any harm.

Incidently, I am now at a 4.13 single earning muliple and I'm no more secure with my finances.

As we can see, I didn't say "I'm no better off" as you misquoted and then built your entire ad hominem argument around. I said "I'm no more secure with my finances".

I might also add that I am 'no less secure with my finances' either.

doire_2

HAMISH_MCTAVISH wrote: »

Mortgage famine ongoing, FTB-s continue to be discriminated against.

.

You make it sound so bad :rotfl:Its as if you care about them

FTB should take repsonsiblity and start saving for a deposit. Problem solved.

Bulls keep harping on that the bearish amongst us shouldn't just expect to be handed a cheap house. If they cant afford it they should move away to an area they can afford or get better qualified or get a better job yet the same bulls think FTB should be handed 95% or 100% mortgages on a plate.

shortchanged_2

RenovationMan wrote: »

I might also add that I am 'no less secure with my finances' either.

That's because interest rates haven't changed since you took out the mortgage therefore your situation wouldn't have changed since you took out the mortgage if you had taken out a 10 times your income mortgage or a 2 times your income mortgage.

You know what I am getting at but I think you are trying to be deliberately obtuse.

I am highlighting that the higher the income multiple the more 'exposed' to risk someone is.

For example 2 people have the same income, say £25000 a year.

Person 1 takes a 3 times income mortgage so a £75000 mortgage
Person 2 takes a 5 times income mortgage therefore a £125000 mortgage.

So, which one is likely to have less disposable income and which one is more exposed to interest rate rises?

Conrad

Graham_Devon wrote: »

They might be there and avaliable in the mortgage tables, but it looks like thats where it pretty much ends for most

I have declined to take on any 95% business in the last 3 years as I knew it would be a time vampire that in all likelyhood would lead to a case being declined.

A lot of threads in the mortgage section asking about 95% and it's as if some people live in a parallel universe. On the one hand you have people like me saying do not bother unless you think you have the capacity to be in the top 1% of risks, on the other you have neave comments along the lines 'why don't you try Clydesdale Bank, they have a good rate'. It's as if the cheer leaders have no sense of proportion or probability.

I get enquires here for 95% and I always say it's a waste of time as only the best will pass and invariably I get the comment 'oh, I think I'm low risk and have a great score' yada yada.

RenovationMan

shortchanged wrote: »

That's because interest rates haven't changed since you took out the mortgage therefore your situation wouldn't have changed since you took out the mortgage if you had taken out a 10 times your income mortgage or a 2 times your income mortgage.

You know what I am getting at but I think you are trying to be deliberately obtuse.

I am highlighting that the higher the income multiple the more 'exposed' to risk someone is.

For example 2 people have the same income, say £25000 a year.

Person 1 takes a 3 times income mortgage so a £75000 mortgage
Person 2 takes a 5 times income mortgage therefore a £125000 mortgage.

So, which one is likely to have less disposable income and which one is more exposed to interest rate rises?

I'm not being deliberately obtuse, I am trying with difficulty to stick to the context of this thread "House Reposessions" and your assertion that people should be restricted to a maximum salary multiplier (x4) because I assume you feel this makes them more secure financially.

With your example,

Person 1 takes a 3 times income mortgage so a £75000 mortgage
Person 2 takes a 5 times income mortgage therefore a £125000 mortgage.

What if person 1 has a £400pm car finance loan, £10k credit card debt and likes to party at the weekend and has expensive tastes in clothing, exotic foreign holidays and consumer goods.

What if person 2 has no debt other than his mortgage, drives a wholly owned 7 year old car, holidays in the UK and has a quiet life enjoying his home.

So, which one is likely to have less disposable income and which one is more exposed to interest rate rises? I would say person 2, wouldn't you?

This is the point that you clearly miss everytime you have a moan about my own circumstances. A salary multiple tells no real story about a person's ability to afford a loan.

shortchanged_2

RenovationMan wrote: »

What if person 1 has a £400pm car finance loan, £10k credit card debt and likes to party at the weekend and has expensive tastes in clothing, exotic foreign holidays and consumer goods.

What if person 2 has no debt other than his mortgage, drives a wholly owned 7 year old car, holidays in the UK and has a quiet life enjoying his home.

So, which one is likely to have less disposable income and which one is more exposed to interest rate rises? I would say person 2, wouldn't you?

This is the point that you clearly miss everytime you have a moan about my own circumstances. A salary multiple tells no real story about a person's ability to afford a loan.

I knew you would come up with these variables. To make my point ignore the variables, they both have very similar lifestyles and outgoings.
Which one is exposed to higher risk?

shortchanged_2

RenovationMan wrote: »

This is the point that you clearly miss everytime you have a moan about my own circumstances. A salary multiple tells no real story about a person's ability to afford a loan.

I'm not having a personal attack on you, I didn't even know what earning multiple you took out until you said earlier on. I've stated for a long time that there needs to be a cap on earning multiples in order to draw a line somewhere or the housing market just returns to how it did in the boom times.

You are referring of course to affordability but I would still stick to a max of 4 times single income, the person who has all the loans and more outgoings simply gets lent less than the person with a frivolous lifestyle.

But surely what you can't deny RenovationMan is the bigger the loan, the bigger the risk, so therefore the higher the earning multiple the bigger the risk as a person is more stretched financially than someone with a lower earning multiple if their circumstances are essentially the same.

FTBFun

shortchanged wrote: »

I knew you would come up with these variables. To make my point ignore the variables, they both have very similar lifestyles and outgoings.
Which one is exposed to higher risk?

Not for mortgage purposes they don't - that credit card debt and the car finance loan would be "adverse credit" for the purposes of applying for a mortgage I believe.

Looking at pure income multiples is too simplistic IMO.

RenovationMan

shortchanged wrote: »

I knew you would come up with these variables. To make my point ignore the variables, they both have very similar lifestyles and outgoings.
Which one is exposed to higher risk?

These variables exist, people are different. Both you and I may earn the same amount but we might have very different lifestyles. If we had the same pay, same lifestyles and same outlook on life then we would more than likely have the same attitude to risk and would therefore end up with a similar sized mortgage loan.

If they had the same attitude to risk but different lifestyles, then person 2 might be prepared to have a larger mortgage in the knowledge that he has a large disposible income that will allow him to make overpayments and pay down his mortgage faster than person 1.

The whole argument is moot because both of them have the same security because if either of them lost their jobs for a protracted period then both of them would lose their houses. £75k of debt is not that much different to £100k of debt when you have no income.

Hence my assertion that I am no more secure financially with 4x salary multiple than I was with 5x salary multiple.

RenovationMan

shortchanged wrote: »

I would still stick to a max of 4 times single income, the person who has all the loans and more outgoings simply gets lent less than the person with a frivolous lifestyle.

If all the bank is looking at is salary multiples then how on earth would they know that the person has all the loans and outgoings in order to lend them less? The criteria in your model is 4xsalary, not disposible income.

shortchanged wrote: »

But surely what you can't deny RenovationMan is the bigger the loan, the bigger the risk, so therefore the higher the earning multiple the bigger the risk as a person is more stretched financially than someone with a lower earning multiple if their circumstances are essentially the same.

There is no dfference in risk with a person who has a 3xsalary multiple and low disposible income than someone with a 5xsalary multiple and high disposible income. The risk isn't in the size of the mortgage it is in the ability to service the debt.

If person 1 has £100 disposible income after his bills, holiday savings, credit card bills, car finance repayments and person 2 has £500 disposible income after paying his mortgage, who will be better placed when rates go up?

Indeed who will be better placed if they lose their jobs. Person 2 will only have to deal with a mortgage company chasing him. Person 1 will have several people chasing debts.