House price rises

jyonda

And have you seen the price of flat caps these days. Eeeeee ecky thump!

Xbigman

I can't believe someone has posted saying that 4 times joint income should be standard and nobody has disputed it. Because it is cobblers.

The current affordability factor is firstly because interest rates are at an historical low and the mortgage providers are cutting each others throats with all sorts of deals. If all those with 3+ multipliers were paying 1970/80 interest rates they would be in big trouble. Relying on interest rates remaining low is a big gamble. It might be a gamble many feel they have to take to get on the housing ladder, but its still a gamble.

The second and bigger factor is what happens when those two incomes suddenly become one. Whether its a child arriving or divorce the effect of dropping an income (or paying out on a lot of child care) can be very dramatic.
My own sister in law wants kids but has realised it will not happen for another ten years. She will then be 37. There is a definate air of regret whenever she talks about it.
Meanwhile I know numerous men in my age group (mid 40's) who are getting divorced and cannot keep their house. The lucky are downgrading and taking on 25 year mortgages they will pay until/into retirement. The unlucky are in housing assoc. properties paying relatively high rents.
I'd hate to be in either position.

I'd like to see lending multiples capped in some way. 3 times joint or 3.5 times single for secured lending, 1 times joint/single income for unsecured lending.
(OK, I know you couldn't just write a law saying that, but some way of limiting multiples could be found).

Its the banks willingness to lend higher and higher multiples that is part of the problem.
Regards



X

ukbondraider

Xbigman wrote:

I'd like to see lending multiples capped in some way. 3 times joint or 3.5 times single for secured lending, 1 times joint/single income for unsecured lending.
(OK, I know you couldn't just write a law saying that, but some way of limiting multiples could be found).

Its the banks willingness to lend higher and higher multiples that is part of the problem.
Regards

X

Complete rubbish.

Limiting to 3x joint when plenty of people should still be able to afford 5 x joint is stupid. OK if she loses her income at 4x joint, her partner would still be able to cover it on what he has coming in (bearing in mind the overpayments). As for interest rates we should all be fixing these anyway. Given hers is a 5 yr fixed for what is most likely going to be an 8-10yr mortgage due to over payments means that she is not that exposed and that if she is then her payments are much smaller anyway. Those that take 2 yr discount mortgages deserve to be hit if rates rise as they have a lower initial rate for that risk. So essentially interest rate rises even to 10% shouldnt be a problem to those that work their finances properly.

Secondly if her joint was capped at 3x then it would hinder her choices which would be unfair.

Thirdly, most salaries increase over the years which means affordability gets easier over the term of the purchase. I wouldnt be surprised if my sister clears hers in the 5 yr fixed term given that I expect her salary to be 6 figures in 5 yrs.

Basically all this talk about affordability in my view is rubbish. My opinion is that the last generation had it easy, i.e. the low salary multiples versus housing costs meant that they didnt need to think about buying houses and didnt need to talk about it as everyone from toilet cleaners to football players could buy one comfortably. Times have changed making it a more selective environment. Sure less people can buy but at the current prices plenty of people can afford homes. The problems lies in the fact that we all want the same level of things and therefore complain. Every male whether ugly or attractive wants to have that very stunning female. Every working person whether toilet cleaner or footballer wants that same 10 acre 100 bed castle. This is where the problems lies.

Alan_M_2

ukbondraider wrote:

Secondly if her joint was capped at 3x then it would hinder her choices which would be unfair.

This is cause and effect and you've completely missed what effect capping income multiples would have had if they had been kept at what we understand to be within reasonable limits.

We now cannot retrospectively cap lending multiples, that in itself would be catastrophic on the current market and cause a huge correction. (In so much as we can't now cap them at a lower level than is currently being leant).

However if historically income lending mulitples had been capped, this wouldn't reduce your choice, it would actually keep house inflation down as people simply wouldn't be able to afford the inflated prices. The simple economic principal of supply and demand. (Which is the whole principal behind the effect or raising interest rates to cap inflation).

The single biggest factor in the recent increase in prices is the ability to borrow what's required. If the ability to borrow the required amount is removed it will control the market value of the commodity being sold, in this case housing.

All forms of finance have become phenomenally cheap especially with deferments set up on many non mortgage forms of borrowing - (i.e. I've never seen so many £100K + vehicles on the road in my life, you can bet you're bottom dollar 95% of these are finance/leased).

cwcw

jyonda wrote:

And have you seen the price of flat caps these days. Eeeeee ecky thump!

Yeah, give me higher crime, higher pollution levels, congestion charges, terrorist attacks, over development AND jellied eels any day of the week. Yawravvin a larf gavna.

roswell

ukbondraider,

Out of interest how old are you ?

No generation ever had it easy and 3 X salary was never easy, the mean average interest rate for the last 50 years has been 8 %, start punching in your 5 X salary at 8 % and then tel me that Mrs can still have a baby / hubby can afford to be off sick 9 months etc.

theres a reason why for the last umteen generations the cap was 3 X and that is because it worked plain and simple. The current environmant of high lending is just creating a bigger collapse when interest rates return to mean and insiolvancies will be massive.

franklee

ukbondraider,

At first glance from your post it looks like your sister and her boyfriend are pretty well off and should be OK with a 4 x joint salary mortgage of 300K. (40K+35K) * 4 = 300K. BUT if that is the case why are they buying a 300K house with a 300K mortgage? In other words where is their saved deposit?!!

If they've got to the point where they wish to buy together but even with a combined income of 75K still need a 100% mortgage then that would indicate to me that their lifestyle doesn't leave any room for saving. This does not bode well for the servicing of a 300K mortgage as they are never mind for the future of higher rates after the five year fix of 5.15% ends or if they want children etc.

Tassotti

Here we go.. another affordability question...

People who cannot afford to buy..don't..

People who can.. do.and make the money....

Always been that way..

No change....bring on lifetime carying on mortgages..maybe someone can afford to buy my portfolio.

roswell

But Its a lot easier for a company to raise capital on many properties than an individual on 2. and then it gets back to the old investment or home debate.

Tassotti

Back to the OP

it's seasonal