Mortgage salary multipliers

HouseMan

I want a bigger mortgage, ideally 5.5 times my salary. From what I have seen on some websites, you can no longer get any more than 5 times your salary. Is this always the case, or can some people get more than that? I have seen a site that says it's possible to get 7-8 times your salary in some cases, although this does sound a bit extreme and I don't know whether it's true.

It seems that they also go through all of your bank details in detail to see if you can afford a mortgage, but if you only have a mortgage 5 times your salary, then this seems a bit pointless for most people without kids. My last mortgage was more than 5 times my salary and it was very easy to afford, plus I made over payments. I will still be able to make the payments if rates were to go up 7%, but you can get rates fixed for 10 years, so rate changes wouldn't really be an issue for those mortgages.

I've reached the point where my house is too small. I can easily get a slightly bigger house, but then I'd be looking to move again in a few years. It seems silly if they are restricting mortgages to 5 times peoples salaries with no go reason.

amnblog

Affordability in today's market is about much more than income multiples.

You won't get more than 5 times your gross income. Don't bother trying.

Thrugelmir

HouseMan wrote: »

It seems silly if they are restricting mortgages to 5 times peoples salaries with no go reason.

Perfectly good reasons why affordability is assessed and sensible ceilings applied to what people able to borrow. If moving house is your aim. Then channel your efforts into repaying your existing one quicker and building up your equity.

HouseMan

Thrugelmir wrote: »

Perfectly good reasons why affordability is assessed and sensible ceilings applied to what people able to borrow. If moving house is your aim. Then channel your efforts into repaying your existing one quicker and building up your equity.

I don't think the ceilings are sensible, and it seems unfair that you could get 6 times your salary until recently. They should look at affordability rather than use some random number. If you can prove to me that it's not possible for anybody to afford more than 5 times their salary, then that would be fair enough, but it doesn't add up for me.

I saved a lot of money this year and had enough... until they changed the rules. With prices going up, it'll probably take another couple of years to get enough money now.

amnblog

HouseMan wrote: »

I don't think the ceilings are sensible, and it seems unfair that you could get 6 times your salary until recently. They should look at affordability rather than use some random number. If you can prove to me that it's not possible for anybody to afford more than 5 times their salary, then that would be fair enough, but it doesn't add up for me.

I saved a lot of money this year and had enough... until they changed the rules. With prices going up, it'll probably take another couple of years to get enough money now.

This is driven by regulation and government policy. Like many things some people consider the result unfair for their particular circumstances.

HouseMan

mortgageFTB wrote: »

It is calculated on affordability I believe.

OOI - Are your affordability calculations done at current interest rates or 7%?

What prices are you looking at vs your income?

I did some calculations recently to work out how much I could afford. I can't remember the exact numbers now, but my limit was around 8% (based on 5.5 times my salary). If I went for a 10 year fixed rate, then it isn't even relevant.

It sounds like the numbers are irrelevant if 5x is the limit.

I think it's very unfair for first time buyers. They'll need an even bigger deposit.

Thrugelmir

HouseMan wrote: »

I don't think the ceilings are sensible, and it seems unfair that you could get 6 times your salary until recently. They should look at affordability rather than use some random number. If you can prove to me that it's not possible for anybody to afford more than 5 times their salary, then that would be fair enough, but it doesn't add up for me.

I saved a lot of money this year and had enough... until they changed the rules. With prices going up, it'll probably take another couple of years to get enough money now.

Give us some facts to comment on. Income, mortgage, LTV etc.

it seems unfair that you could get 6 times your salary until recently.

Perhaps it's missed your attention that the lenders offering these deals either went under, left the market or merged with other mortgage providers. NRAM, the remanants of the old Northern Rock and Bradford & Bingley mortgage books, contains a residue of toxic debt that needs resolving. The poor lending practices of the credit boom years haven't gone away yet. Hence why the tighter regulation was a necessity.

amnblog

What our OP either can afford, or believes they can afford is irrelevant - As is what the lender might consider a low risk.

The regulator dictates the limits of risk the lenders can have on their books. If Lenders need to reduce cases within a certain risk profile, they will tighten their criteria accordingly.

Plan B is de regulate and leave it to market forces.

This may suit our OP but will put the Money Mail in to a frenzy.

TranceNRG

From what I heard from my mortgage advisor there are still a few lenders that offer more than 5x but I doubt you could get 6x the salary. Most lenders have a cap below 5x. The lender who are still offering 5x salary (for example Halifax) could also lower their cap to below 5 so I would say hurry up if you are wanting to get 5x salary.

kingstreet

TranceNRG wrote: »

From what I heard from my mortgage advisor there are still a few lenders that offer more than 5x but I doubt you could get 6x the salary. Most lenders have a cap below 5x. The lender who are still offering 5x salary (for example Halifax) could also lower their cap to below 5 so I would say hurry up if you are wanting to get 5x salary.

It already has in some cases.

HTB, shared ownership etc are all capped at 4.5x.

However, it can be 4.5x on top of a certain amount of credit, actually providing upto 5x in a perverse way.

The only way to see this in action is to play with the Intermediary Affordability Calculator and see.

pathtofreedom

HouseMan wrote: »

If I went for a 10 year fixed rate, then it isn't even relevant.

Not sure why you think this I'm 8 years into owning my first house, and if I hadn't over paid loads over the years I'd still be in negative equity with a northern rock mortgage at 6.5% I couldn't escape from. Look on the boards there are lots of stories of people who haven't been lucky enough to overpay and remortgage still away from nram.

You might plan to over pay now and remortgage when the 10 year fix runs out, but unless you can predict the global financial markets, how the government will change the laws, that you won't be made redundant, or get sick, or divorced, or married, or have kids and they get sick, or a million other things that happen to people every day, you might well get to the end of a 10 year fix then rates jump to a rate you can't afford and you can't just sell as you'd need a loan to pay back the outstanding mortgage due to the negative equity.

Just as it might not happen to you, it has happened to millions hence why these affordability rules have come in not only to protect the banks but the people as well. Ok yes they still need some work as some people still can't remortgage to a lower rate / payment even though they are paying more now as they can't meet the new rules but you're not special. If you can OP that much that fast just spend another year or two saving to get a place you can afford.