Mortgage x salary irresponsible!

monty-doggy

I'm shocked to read on some threads that some lenders are offering up to 5.5 x salary.

If you earn say £200k I can understand but for someone earning £20-30k if the interest rates rose slightly you'd be screwed.

Also on a lower wage, if such a high proportion of salary is paying mortgage how do they expect to cope when they need a new boiler or windows or roof?

The lenders are very irresponsible, and the people who are blinded by the affordability are crazy to think its a good idea!

witchy1066

most lenders will not go to 5x on earnings below a certain level,

for 20 to 25K a year the most we could borrow was 3.5 times gross salary

also we had to fill in an extensive affordability form,


hopefully, it is not just our lender who has this criteria

brit1234

I agree, with a return to loose lending we have a looming mortgage meltdown. Help to buys 95% mortgages on a inflated market is another example of this madness.

Building_Surveyor

People seem to want to buy as big as they 'think' they can afford these days. Rather then moving up the ladder... Although I can understand why, moving house is expensive business.

Thrugelmir

monty-doggy wrote: »

I'm shocked to read on some threads that some lenders are offering up to 5.5 x salary.

Lenders will base a decision on individual circumstances. Lenders now have take affordability very seriously. As onus is them to satisfy themselves. Banks aren't going to risk another PPI scandal that's a certainty.

monty-doggy

I think there is so much pressure on young people to buy, and the constant HTB in the news is pushing it.
In some ways I think the 95% mortgage is also irresponsible, it hardly encourages people to save for a deposit, and learn to budget/run a house.

I have a younger brother who has no idea what it takes to run a household, and he is determined to buy a house. I'd hate for him to fail. I only hope he sees sense and waits a while!

ACG

A single person on £20k with no kids or credit commitments why should they not be able to borrow 5.5x income. I bet they have far more disposable income than a couple with 2 kids and a car on finance.

£20k wage = take home pay of £1350 (approx).

£110k mortgage over 25 years = £550.
£800 per month to cover food and bills for a single person is plenty.

£110k mortgage over 35 years = £490 per month.
£860 left over each month.

I would never suggest anyone do 5.5x income (i tend to work to the tune of 4x income to start with) but if they can evidence affordability then i would have no issue doing it.

The figures can stack up if you go through them.

I know one lender gone to 6.5x income in similar circumstances (single person no credit commitments - albeit with a higher income).

monty-doggy

ACG wrote: »

A single person on £20k with no kids or credit commitments why should they not be able to borrow 5.5x income. I bet they have far more disposable income than a couple with 2 kids and a car on finance.

£20k wage = take home pay of £1350 (approx).

£110k mortgage over 25 years = £550.
£800 per month to cover food and bills for a single person is plenty.

£110k mortgage over 35 years = £490 per month.
£860 left over each month.

I would never suggest anyone do 5.5x income (i tend to work to the tune of 4x income to start with) but if they can evidence affordability then i would have no issue doing it.

The figures can stack up if you go through them.

I know one lender gone to 6.5x income in similar circumstances (single person no credit commitments - albeit with a higher income).

I didn't think of it like that. We've kids and car so I guess not as affordable.
But to me £800 to pay council tax, water, gas, electric, phone, insurance, food, travel etc doesn't leave a lot for 'living' and saving.

Depends on chosen lifestyle I guess!

Thrugelmir

monty-doggy wrote: »

I think there is so much pressure on young people to buy, and the constant HTB in the news is pushing it.
In some ways I think the 95% mortgage is also irresponsible, it hardly encourages people to save for a deposit, and learn to budget/run a house.

Despite the media hype. The world hasn't changed one iota. High % mortgages were available prior to HTB 2. In fact the Nationwide who transact about 20% of the business at this level haven't yet decided whether to join HTB 2. One suspects that they already have enough business at this level.

Lending criteria has become so much tougher over the past 18 - 24 months. Days of easy lending and over extending are over.

monty-doggy

Perhaps I never paid as much attention as I do now. I was a FTB in June and before that always assumed I'd never be able to afford to buy.

I'm hoping to pay it off early, mostly because the thought of interest rates significantly rising scares me, but again prob listening to too much hype!

sulphate

monty-doggy wrote: »

I didn't think of it like that. We've kids and car so I guess not as affordable.
But to me £800 to pay council tax, water, gas, electric, phone, insurance, food, travel etc doesn't leave a lot for 'living' and saving.

Depends on chosen lifestyle I guess!

We have a mortgage of £527 ish a month and our total essential outgoings are £1200 per month so we spend around £673 on other bills and essentials and if I was a single person it would be much less.

It doesn't seem that long ago that I was taking home £800 a month salary, lol.