Regulator to cap income mutliples

amnblog

How much truth is there in this rumour that the Government intend to give the regulator the power to cap the maximum that lenders can offer against income on mortgages?

http://www.theguardian.com/business/2014/jun/12/osborne-regulators-power-cap-mortgage-loans

Who will the winners and losers be?

bloolagoon

I've never understood how they say they are being responsible when there is no reviews or joined up approach. Limiting it to income multipliers is only part of the problem as income can drop but your outgoings stay the same. Even these new affordability rules are strange to me. I could take £400,000 of mortgage as I have no outgoings only to then spend spend spend once given as they aren't joined to other lenders. The whole financial market needs to be joined up and borrow responsibly, not just mortgages.

Other than lower LTV's or forced insurance for loss of income (look where that got the industry with bandwagon claimants), I'm not sure what the answer is. In an ideal world for me personally mortgages would be set at 20% over actual cost that is placed into a security investment scheme, therefore if you lost your job you had these overpayments to tide you over that are credited to your mortgage. I've always worked on a save whilst you can motto but it's clear not everyone does and lending on incomes/affordability will always have risks where people don't have reserves as income can change between mortgages as can affordability.

ACG

Its 100% true that they are giving the regulator the option to cap income multiples.

There is nothing to say that power will actually be used. If you look at Halifax/Lloyds recently they put their own cap in place for large mortgages. If lenders are being responsible then there is no reason for th regulator to get involved... Im not saying capping at 4x income is responsible, its not my decision but I dont think the regulator will want to get too involved in setting criteria personally.

Thrugelmir

Just another tool in the box. There's still concern over levels of consumer indebtedness which are at record highs.

Banks are going to have to stress test to a 35% fall in house prices this year.

Still plenty of legacy issues post GFC of 2007/08 to address.

TrickyDicky101

Assuming it did happen it could potentially immediately place some existing borrowers (especially in London) in negative equity as the potential pool of buyers at pre-cap prices would be curtailed.

It would do nothing for the real problem with housing in the UK which is a lack of supply.