Income Multiples or Affordability?

littlemi_2

Which do you subscribe to? If any.

The old fashioned multiples whereby you would look to borrow 3.5 times the main annual income in addition to one times the second income OR 2.5 times the joint annual incomes.

Or the new style 'affordability' calculators that take into account essential outgoings, day-to-day living costs, credit history and future interest rate changes.

edit: Don't forget to post why. Don't just vote and run =D

Brallaqueen

Definitely affordability because it helps people like me (low paid but fairly frugal) to show that wages aren't everything. How you spend your money is important too.

TheSandman

Affordability every time.

Only because if I were to buy a property I'd much prefer a flat close to the city centre, these are much more expensive but then again I'm walking distance from work so no need to buy, fuel, maintain and insure a car. Easily a few hundred pounds a month (factoring in depreciation) extra for someone who buys a place 10 miles from their work in the cheaper areas.

The risk here is an increase in interest rates but as you've seen the increases in insurance of 50% over two years and increases in petrol prices are just as dangerous, and there are probably a few at work who will find public transport either unworkable or unpalateable.

opinions4u

Instinctively affordability.

But that's not to say affordability models are perfect.

For example, the post above mentions motoring expenses. Do all lenders factfind this information before calculating loan available? Didn't think so.

Affordability models also developed at the same time as the proliferation of mortgage lending that fuelled the property boom. Logically the calculations made should be scaled back further to fall in line more with the traditional income multiples.

As it is, house prices are being propped up by an ability to borrow too much.

One other thing, interest rates shouldn't influence an affordability model. Just because rates are low today doesn't mean they will be low tomorrow so it makes no sense to lend more in a low rate environment.

shortchanged_2

Income multiples for me. Because it helps prevent all sorts of 'creativity' by lenders and borrowers. However in saying that, I am actually in favour of a combination of both. By that I mean a limit of say 3.5 times single and 2.5 times joint, like it used to be before the stupid boom and if you have a rubbish credit history then you simply get lent less.

It would also I feel help prevent more housing boom and bust cycles that we seem to be so prone to in the UK.

Thrugelmir

There's base levels of affordability depending on factors such as number of dependents, expensive hobbies etc. Above that level then multipliers work.

Historically lenders maintain their mortgage books at around 3 - 3.5 times applicants incomes.

brit1234

Income multiples every time. So called affordability is just away for people to over borrow and they will come unstuct if rates were to rise which they will do at some time.

You can't go wrong with 3.5 time single salary or 3 times double salary.

Thrugelmir

brit1234 wrote: »

You can't go wrong with 3.5 time single salary

What if the applicant has wife and 5 kids to support, and keeps racehorses as a pastime.

opinions4u

Thrugelmir wrote: »

What if the applicant has wife and 5 kids to support, and keeps racehorses as a pastime.

Do affordability models take in to account racehorse ownership?

betmunch

opinions4u wrote: »

Do affordability models take in to account racehorse ownership?

I think Abbeys new one does!

Bluemeanie_2

I think it should be affordability. We have a joint income of £34k a year but use our money much more wisely than others I know.