Only freedom will do

newgirly

I'm really sorry to hear that Ed Its far too rigid a system and having a child/ren reduces what you can borrow a lot.

Surely it should be either like the old system of so many times your wages, or else fully according to income and spending patterns regardless of children. Many of us with families will be very frugal and some without kids will not be.

I really don't understand the current system , I hope you manage to find a solution asap.

edinburgher

The irony of it is that I'd be entirely happy to provide far more information than their basic models require, we can prove affordability were common sense to be a thing

I have spoken to a broker this morning who thinks that £185k is achievable based on the available data (p-t etc.), which is a far cry from the £163k that current lender considers safe).

Keen to remain honest and upfront, B@rclays do not make it easy

Karmacat

edinburgher wrote: »

Keen to remain honest and upfront, B@rclays do not make it easy

Ah! Thing is, although I had to lie to *get* that house, it was easily affordable to me, easily - I rented out two bedrooms, in an extremely popular area of an extremely popular university/tourist town. Job done.

And I don't feel I need to be honest with big firms that are trying to maximise their profits from me. But it's horses for courses, you can only go as far as what you find to be right. Marge Piercy had a great saying on that. She used "person" as an androgynous noun, instead of "he" "her" and "one".

"Person must not do what person cannot do".

Goldiegirl

The lending world has changed a lot since I started out in the 1980's.


The lending multiples were really straightforward, typically 3.25 x the higher salary plus once the lower, and towards the end of the decade, when it was recognised that couples often had similar salaries, 2.5 x joint income. Nothing else was considered, other credit commitments and the amount of children didn't come into it.


The relationship the bank and the customer had was completely different to what it is today. It was a relationship based on mutual trust and respect, and loyalty on both sides.


The customer would have all their financial products with the same bank, and would often call in at the local branch, so the staff and the customer actually knew each other personally.


All lending decisions were made locally, so when it was time for the customer to move house, if it turned out that the customer needed a little more than what the calculations said, we genuinely knew that customer inside out over a period of 20 years or more, so it was sometimes possible to lend slightly more, based on that long term relationship.


But things weren't perfect. Each branch had a mortgage quota, and if you had lent your quota for the month, then the customer had to come back next month!


Things changed in the early 90's when centralisation started, and brokers became a force in the industry. One particular assistant manager I worked with agreed mortgages of 6 x income, to keep in with a powerful broker.


Between then and now, life has changed greatly. Every aspect of our lives is more complicated now and there's no going back to the more rational days of the 80's.


I think the key elements of the situation we find ourselves in today are accountability and loyalty.... or the lack of


Although, at local level, we tried to behave responsibly with our mortgage approvals during the years where it all went wrong, the industry has held up it's hands and said that many mistakes were made.


This 'responsible lender' thing and the 'what if the interest rates went up to 7%.'


I think this is a direct result of borrowers not taking responsibility for their actions.


We've all seen posts all over MSE, where a borrower has problems, and blames the bank for lending them the money. The bank didn't force them at gun point to take the money - surely the borrower has to take responsibility too? By making the potential borrower aware of what will happen if interest rates increase, the customer can't come back later complaining that' no one told me my payment would increase if interest rates went up' (believe me, this does happen)


The underwriters have got to act within the parameters they are given. They are generally very experienced in lending, and have seen it all. It's not that they are not savvy, and they know the ludicrousness of the situation when the computer says no, but they can see that the customer would be able to maintain the monthly payment. They have to justify every lending decision they make, in the event of an audit, and too many off piste judgement calls would mean that their job could be at risk.

And this brings me on to loyalty. These days customers re-mortgage on a regular basis. So there's no real incentive for an underwriter to risk an out of the box decision on someone who'll likely remortgage in a couple of years anyway.


None of this helps you Ed, but I thought some background information on how we've got to this bizarre point in lending history might make some sense of it all.


Hopefully a broker will be able to find you a lender that will be able to accommodate you

edinburgher

Thought provoking stuff Goldie and very interesting.

It reminded me of a really fascinating book (although technically a bit weak for you as a FS stalwart) by Margaret Atwood, called 'Payback: Debt and the Shadow Side of Wealth'. Take that as a compliment, she's one of our favourite authors.

Goldiegirl wrote: »

The lending multiples were really straightforward, typically 3.25 x the higher salary plus once the lower, and towards the end of the decade, when it was recognised that couples often had similar salaries, 2.5 x joint income. Nothing else was considered, other credit commitments and the amount of children didn't come into it.

Did this work for the most part? I can look at graphs of how house prices have increased etc. and it still seems bizarre that people were able to afford (nice) houses on what seems like such low multiples vs. today. We will be paying 5x what the seller did for our new house (in the 70s).

The relationship the bank and the customer had was completely different to what it is today. It was a relationship based on mutual trust and respect, and loyalty on both sides.

I think that this attitude shift goes further than just banks and customers. I know that self-interest is nothing new, but the current attitudes of 'beggar thy neighbour', I'm alright Jack' and the tragedy of the commons means that much of life now seems to be a battle between conflicting self-interests, not a compromise to find solutions that work for all. Without going all political, the inevitable end result of capitalism?

The customer would have all their financial products with the same bank, and would often call in at the local branch, so the staff and the customer actually knew each other personally.

Will come back to this point, but lack of loyalty would seem again to be the logical conclusion of free market ideology.

We've all seen posts all over MSE, where a borrower has problems, and blames the bank for lending them the money. The bank didn't force them at gun point to take the money - surely the borrower has to take responsibility too? By making the potential borrower aware of what will happen if interest rates increase, the customer can't come back later complaining that' no one told me my payment would increase if interest rates went up' (believe me, this does happen)

I have been that whinger, but quickly got my act together when I realised that 1) nobody gave a crap and 2) moaning wouldn't help me pay off my student debts

I realise that people in the UK are increasingly litigious and that financial institutions need to cover themselves. I think that the increasingly clear paperwork (key facts documents, T&Cs etc.) should be sufficient to show their due dilligence. For example, customer tries to sue, bank produces 4 examples of risks being highlighted to a customer.

If, however, customers are willing to shoulder some of that risk (for example, signing a disclaimer), I don't see why the banks still use tools such as affordability modelled at 2x the current rate to refuse lending. What is the problem, as they can evict the borrower if they fail to meet their end of the deal?

The underwriters have got to act within the parameters they are given. They are generally very experienced in lending, and have seen it all. It's not that they are not savvy, and they know the ludicrousness of the situation when the computer says no, but they can see that the customer would be able to maintain the monthly payment.

Back to your earlier point re. all products at once bank.

I wasn't slagging off underwriters, that probably came across badly. In the olden days, you knew your customers because they had all their products with you. This allowed you to make management decisions where something didn't quite fit the usual criteria.

And this brings me on to loyalty. These days customers re-mortgage on a regular basis. So there's no real incentive for an underwriter to risk an out of the box decision on someone who'll likely remortgage in a couple of years anyway.

Very very true, but what underwriters *should* have access to is more of the masses of data that is gathered by CRAs and the banks themselves. I can't help but feel that the big data revolution isn't nearly as useful as it was meant to be...

Darpett

Delurking to express sympathy, ouch £3000..

That being said it’s £8.33 a month for a 30 year term and over time that £8.33 is worth less than money now.

Using the MSE calculator at a rate of 3.5%

To pay back a mortgage of £133,000 over 25 years with no OP’s = total repayment of £195,311 monthly payment = £651

Over 30 years with no OP’s = £210,237 monthly payment = £584

By taking the longer term and OP’ing the difference of £67 the total amount repaid is =£195,318 so in effect you would pay the same as the shorter term arrangement (well there is a negligible difference).

Or a mortgage of £150,000 over 25 years = £225,358 v 30 years = £242,579
Monthly payment £751 v £674
Pay the difference of £77 and the 30 year cost drops to £225,421 (and you knock 4yrs 11 months off)

Go to 17 years the total repayment is £199,286 and monthly amount £977 pay the difference of £303 based on a 30 year term and in total you repay £199,290 (and knock 12 years 11 months off)

I know you want to get rid of the mortgage and I know it’s emotive but it’s not the starting term (17years that I think you want) that dictates the end date but the interest rate you can get and OP’s you can make.

If you need to extend the term to make it “affordable” could you run some similar numbers through to see what effect that has? I suspect that you will find it is the same as above.

I know people often wish to shorten the terms to help their mortgage free status but in truth lengthening the term means you are building in a future buffer if the unexpected happens which gives you more flexibility, and as you can see the cost is the same if you do the maths

Goldiegirl

Did this work for the most part? I can look at graphs of how house prices have increased etc. and it still seems bizarre that people were able to afford (nice) houses on what seems like such low multiples vs. today. We will be paying 5x what the seller did for our new house (in the 70s).

Certainly in my area of the country it did seem to work, and I think it probably kept the housing market within affordability. I think it started to get our of hand when the lenders worked out their own credit scoring systems, giving higher income multiples to people who passed the internal scoring with an 'A' pass, and to people who had more equity. People could afford to borrow more, thus pushing the price of houses upwards. Which is no good for people just starting out

I think that this attitude shift goes further than just banks and customers. I know that self-interest is nothing new, but the current attitudes of 'beggar thy neighbour', I'm alright Jack' and the tragedy of the commons means that much of life now seems to be a battle between conflicting self-interests, not a compromise to find solutions that work for all. Without going all political, the inevitable end result of capitalism?

The relationship between banks and customers just reflects modern day life. Everything is more complicated, and everything is more of a struggle. I don't know if it's capitalism that has brought us to where we are today, but there's no going back to where we were 30 years ago, that's for sure

I have been that whinger, but quickly got my act together when I realised that 1) nobody gave a crap and 2) moaning wouldn't help me pay off my student debts

You got your act together and sorted your life out, but there's still people out there who haven't taken responsibility for their life.


Sadly, it's people like you, who are thoughtful and responsible who are paying the price for the others lack of responsibility. The banks are taking extreme measures to protect themselves and you are getting caught up in it all - even though you are a model financial citizen

What is the problem, as they can evict the borrower if they fail to meet their end of the deal?

Eviction is the absolute last resort and the banks don't want to evict people unless there's no other option (it costs too much for one thing)

I can't help but feel that the big data revolution isn't nearly as useful as it was meant to be...

I think that's true of everything relating to technology..... it just adds further complications to an already complicated life.






It's all incredibility stressful when you are the person wanting the mortgage. From everything you've ever posted, it's obvious that you are the ideal mortgage candidate and in an age where staff in banks weren't constrained by rules and regulations, you'd have your mortgage by now.




I'm sure you'll get your mortgage - it might not be the one you planned, but you will get there

A_Frayed_Knot

Karmacat wrote: »

Ah! Thing is, although I had to lie to *get* that house, it was easily affordable to me, easily - I rented out two bedrooms, in an extremely popular area of an extremely popular university/tourist town. Job done.

Knew what you were doing, with your head screwed on, as they say. You had a plan from the start - well done to you:T

And I don't feel I need to be honest with big firms that are trying to maximise their profits from me. But it's horses for courses, you can only go as far as what you find to be right. Marge Piercy had a great saying on that. She used "person" as an androgynous noun, instead of "he" "her" and "one".

"Person must not do what person cannot do".

I second this, there are some people who have a good all round matter of fact way with money, bills, etc and there are people who are a bit (clueless) shall we say, take the money without working out, can they afford it, how are they going to pay back,what happens if and when they can't pay back.


The bank gives me a limit, I have my limits, - not the same. I won't go beyond my limit, even if someone tells me I can, because I'm not comfortable with their limit. I want a life as well, but as you have pointed out - there's ways and means to get extra cash if need be - like renting out 2 rooms, I've been told I could do the same, but am I comfortable with it - not yet, (but would love to be - i'm working on it) as i'm not at the stage ..... needs must ... yet:)


Mr E - hope you get yours sorted out. You know you can make spare cash and so never (did I say - never) be sort of a bob or two, well you do have a house to renovate/decorate/extend etc,etc - this was my reason on taking out a 18yr term instead of a 14yr term at the start of my mortgage (I had to renovate/decorate), but after the 2 yr fixed, then some 18mnths later went into another 2 yr fixed deal for an 8 year term.


Just trying to say, that its no big deal if you take the term for longer at the start, so how finances go after your fixed term and then take it from there, if you have managed to save a lump sum, then o/p before going into next deal, of course you know all this already, just trying to get you to see .... its not the end of the world taking out a longer term 1st time round.:)

PositiveBalance

Am having to reply on my mobile as my computer is broken AGAIN! *Sigh* Bear with me r.e. typos etc.

edinburgher wrote: »

or we need to use all equity from the flat sale towards the house, meaning we can only do very minimal renovations

If you really want the house don't worry about this too much: at the rate you are able to put money away you could save up to do the necessary quite quickly (unless it's falling round your ears when you are moving in, but I don't think you are daft enough to move a baby into that type of a mess).

edinburgher wrote: »

Banks don't lend over home report valuation, so we need to pay £15k towards the purchase price before they'll even look at a mortgage

This is ringing massive alarm bells in my head. Why would you want to pay more than the house is supposed to be worth? You're not daft, so there must be blummin' good reason.

edinburgher wrote: »

Sorry, this probably sounds like an entitled rant. I'm just frustrated that we can save £££££ in a year while significantly OPing our mortgage

Not going to lie, that would piddle me off something rotten, too! I have spent since Christmas working 6 days a week most weeks in order to make my pay packet look fatter than it really is for similar affordability reasons. There is little justice in the world, sometimes!

edinburgher

This is ringing massive alarm bells in my head. Why would you want to pay more than the house is supposed to be worth? You're not daft, so there must be blummin' good reason.

It's not uncommon in popular parts of Glasgow at the moment. We got 6% over our valuation for the flat. We paid 7% over valuation for the house. For that we got a nice house on a corner plot in a very popular suburb that has some of the best schools in Scotland, but is leafy and residential and an easy commute to the city centre.

In my mind, that was equivalent to a years private schooling for two kids. Not necessary, I know, but some of the alternative areas we looked at had schools that would worry us.