Do all mortgage lenders use the 4.5x salary or are they more flexible?

SavingPennies_2

savefortherain said:

SavingPennies_2 said:

£500 a month *is* a lot for a salary of 17000 once you deduct council tax, utilities, food, living costs etc. and that's before repairs, unexpected emergencies, savings.. The bank wants to know you can afford it and have wiggle room if your circumstances or the interest rates change, saying you will scrimp to get by or take a second job might work in reality but won't cut it with the bank.

It's not a lot, if a single person without dependents is not saving at least £200 a month then they need to use the moneysavingexpert tool. Even more if not running a car and using public transport.

Remember for people on the absolute minimum wage, their earnings can only go up. Promotions, second jobs, zero contract side hustles, money saving schemes, overtime, lodgers.

The whole 4.5x system seems designed to not just protect from reckless borrowing/lending but also prevent FTBs getting on the ladder.

Gah, I meant "is *not* a lot" as the OP states it's easily affordable but it isn't in reality - that's what I get for working and typing on forums at the same time - edited my post! Incidentally my take home salary is 4x my mortgage, I don't have kids, a car or any other debt and I still don't feel particularly flush once the mortgage and all the essential outgoing have be paid.

theoretica

savefortherain said:

SavingPennies_2 said:

£500 a month *is* a lot for a salary of 17000 once you deduct council tax, utilities, food, living costs etc. and that's before repairs, unexpected emergencies, savings.. The bank wants to know you can afford it and have wiggle room if your circumstances or the interest rates change, saying you will scrimp to get by or take a second job might work in reality but won't cut it with the bank.

It's not a lot, if a single person without dependents is not saving at least £200 a month then they need to use the moneysavingexpert tool. Even more if not running a car and using public transport.

Remember for people on the absolute minimum wage, their earnings can only go up. Promotions, second jobs, zero contract side hustles, money saving schemes, overtime, lodgers.

The whole 4.5x system seems designed to not just protect from reckless borrowing/lending but also prevent FTBs getting on the ladder.

But a single person without dependents can quite rapidly acquire a dependent - a risk the banks will need to calculate on average. 

If someone is saving £200 a month it will take a few years to get a decent deposit.  Save from 18 to 25 and have £16k or so deposit which is good.  But if still on minimum wage and hours at 25 after saving for several years that is something the bank might also want to take into account - if they haven't had promotions, overtime, second jobs by that stage it weakens the argument for the potential of their future higher earnings.

savefortherain

SavingPennies_2 said:

savefortherain said:

SavingPennies_2 said:

£500 a month *is* a lot for a salary of 17000 once you deduct council tax, utilities, food, living costs etc. and that's before repairs, unexpected emergencies, savings.. The bank wants to know you can afford it and have wiggle room if your circumstances or the interest rates change, saying you will scrimp to get by or take a second job might work in reality but won't cut it with the bank.

It's not a lot, if a single person without dependents is not saving at least £200 a month then they need to use the moneysavingexpert tool. Even more if not running a car and using public transport.

Remember for people on the absolute minimum wage, their earnings can only go up. Promotions, second jobs, zero contract side hustles, money saving schemes, overtime, lodgers.

The whole 4.5x system seems designed to not just protect from reckless borrowing/lending but also prevent FTBs getting on the ladder.

Gah, I meant "is *not* a lot" as the OP states it's easily affordable but it isn't in reality - that's what I get for working and typing on forums at the same time - edited my post! Incidentally my take home salary is 4x my mortgage, I don't have kids, a car or any other debt and I still don't feel particularly flush once the mortgage and all the essential outgoing have be paid.

I am saying it is in reality affordable (I am the OP). No one said you have any right to be flush when buying a house and we're talking about minimum wage here not £26k Junior Doctors. Look at some brief numbers

+1250 take home (base amount after tax and ni, not including extra income)

-500 mortgage

-100 council tax (minus single person discount, might be increased if taking in lodgers)

-120 energy and water

-30 (tv licence and internet/phone line)

-150 (food and household items)

-50 (transport/mobile/other)

That leaves £300 a month for socialising, clothes, entertainment and savings. Running a car would eat into that, but running a car also opens up more opportunities for additional income so it kind of evens out.

The numbers add up, even when accounting for rising costs/taxes. Unless I am missing something then lenders are not lending to people who can afford it due to some government red tape.

I guess the argument is that there are people who can drive safely at 80-90mph on the motorway but the 70mph is the legal limit for everyone. Maybe not a good analogy, I don't know.

savefortherain

theoretica said:

savefortherain said:

SavingPennies_2 said:

£500 a month *is* a lot for a salary of 17000 once you deduct council tax, utilities, food, living costs etc. and that's before repairs, unexpected emergencies, savings.. The bank wants to know you can afford it and have wiggle room if your circumstances or the interest rates change, saying you will scrimp to get by or take a second job might work in reality but won't cut it with the bank.

It's not a lot, if a single person without dependents is not saving at least £200 a month then they need to use the moneysavingexpert tool. Even more if not running a car and using public transport.

Remember for people on the absolute minimum wage, their earnings can only go up. Promotions, second jobs, zero contract side hustles, money saving schemes, overtime, lodgers.

The whole 4.5x system seems designed to not just protect from reckless borrowing/lending but also prevent FTBs getting on the ladder.

But a single person without dependents can quite rapidly acquire a dependent - a risk the banks will need to calculate on average. 

If someone is saving £200 a month it will take a few years to get a decent deposit.  Save from 18 to 25 and have £16k or so deposit which is good.  But if still on minimum wage and hours at 25 after saving for several years that is something the bank might also want to take into account - if they haven't had promotions, overtime, second jobs by that stage it weakens the argument for the potential of their future higher earnings.

Last time I checked a dependent requires a partner, hence another income (though I suppose there could be situations where that isn't the case).

Extra income doesn't have to come from promotions. Do banks really care if you've had pay increases through promotions?

lookstraightahead

It would be really interesting to see who was low risk when taking on a mortgage, and who would be high risk now. 

2 incomes, no children, recent promotion.

Then 1.5 incomes, children, pets, new 4x4, nursery fees etc

i doubt there's any such stats

SavingPennies_2

On paper the numbers may add up but in reality things tend to cost more than we think - £150 for food and household items for example is tight. Do you currently rent and if so is this how much you spend now? I'm just playing devils advocate because the banks will be looking at how much you can afford with wriggle room, not how much you can live off bare minimum. £300 for running a car, socialising, clothes, entertainment, insurance, savings, house repairs doesn't sound like much. On the plus side your wage will go up so it would get easier but banks will be looking at your position *now* not what you might be earning in the future or if you take in a lodger.

lookstraightahead

theoretica said:

savefortherain said:

SavingPennies_2 said:

£500 a month *is* a lot for a salary of 17000 once you deduct council tax, utilities, food, living costs etc. and that's before repairs, unexpected emergencies, savings.. The bank wants to know you can afford it and have wiggle room if your circumstances or the interest rates change, saying you will scrimp to get by or take a second job might work in reality but won't cut it with the bank.

It's not a lot, if a single person without dependents is not saving at least £200 a month then they need to use the moneysavingexpert tool. Even more if not running a car and using public transport.

Remember for people on the absolute minimum wage, their earnings can only go up. Promotions, second jobs, zero contract side hustles, money saving schemes, overtime, lodgers.

The whole 4.5x system seems designed to not just protect from reckless borrowing/lending but also prevent FTBs getting on the ladder.

But a single person without dependents can quite rapidly acquire a dependent - a risk the banks will need to calculate on average. 

If someone is saving £200 a month it will take a few years to get a decent deposit.  Save from 18 to 25 and have £16k or so deposit which is good.  But if still on minimum wage and hours at 25 after saving for several years that is something the bank might also want to take into account - if they haven't had promotions, overtime, second jobs by that stage it weakens the argument for the potential of their future higher earnings.

That's really very subjective variables though. It doesn't weaken the argument for potential at all in my opinion. How can anyone be judged on where they might be in 5 years time? Which box is ticked?

SavingPennies_2

lookstraightahead said:

It would be really interesting to see who was low risk when taking on a mortgage, and who would be high risk now. 

2 incomes, no children, recent promotion.

Then 1.5 incomes, children, pets, new 4x4, nursery fees etc

i doubt there's any such stats

But usually by that time more of the mortgage would be paid off so lower LTV, and income would be higher (even if 1.5 instead of 2)

MaryNB

savefortherain said:

theoretica said:

savefortherain said:

SavingPennies_2 said:

£500 a month *is* a lot for a salary of 17000 once you deduct council tax, utilities, food, living costs etc. and that's before repairs, unexpected emergencies, savings.. The bank wants to know you can afford it and have wiggle room if your circumstances or the interest rates change, saying you will scrimp to get by or take a second job might work in reality but won't cut it with the bank.

It's not a lot, if a single person without dependents is not saving at least £200 a month then they need to use the moneysavingexpert tool. Even more if not running a car and using public transport.

Remember for people on the absolute minimum wage, their earnings can only go up. Promotions, second jobs, zero contract side hustles, money saving schemes, overtime, lodgers.

The whole 4.5x system seems designed to not just protect from reckless borrowing/lending but also prevent FTBs getting on the ladder.

But a single person without dependents can quite rapidly acquire a dependent - a risk the banks will need to calculate on average. 

If someone is saving £200 a month it will take a few years to get a decent deposit.  Save from 18 to 25 and have £16k or so deposit which is good.  But if still on minimum wage and hours at 25 after saving for several years that is something the bank might also want to take into account - if they haven't had promotions, overtime, second jobs by that stage it weakens the argument for the potential of their future higher earnings.

Last time I checked a dependent requires a partner, hence another income (though I suppose there could be situations where that isn't the case).

Extra income doesn't have to come from promotions. Do banks really care if you've had pay increases through promotions?

Halifax asked me about pay increases during affordability checks. I told them I was expecting a promotion before the end of the fixed term due to the nature of my career path. They were checking how easily I could afford my repayments after the fixed term if interest rates increase significantly by the time I have to remortgage.

lookstraightahead

MaryNB said:

savefortherain said:

theoretica said:

savefortherain said:

SavingPennies_2 said:

£500 a month *is* a lot for a salary of 17000 once you deduct council tax, utilities, food, living costs etc. and that's before repairs, unexpected emergencies, savings.. The bank wants to know you can afford it and have wiggle room if your circumstances or the interest rates change, saying you will scrimp to get by or take a second job might work in reality but won't cut it with the bank.

It's not a lot, if a single person without dependents is not saving at least £200 a month then they need to use the moneysavingexpert tool. Even more if not running a car and using public transport.

Remember for people on the absolute minimum wage, their earnings can only go up. Promotions, second jobs, zero contract side hustles, money saving schemes, overtime, lodgers.

The whole 4.5x system seems designed to not just protect from reckless borrowing/lending but also prevent FTBs getting on the ladder.

But a single person without dependents can quite rapidly acquire a dependent - a risk the banks will need to calculate on average. 

If someone is saving £200 a month it will take a few years to get a decent deposit.  Save from 18 to 25 and have £16k or so deposit which is good.  But if still on minimum wage and hours at 25 after saving for several years that is something the bank might also want to take into account - if they haven't had promotions, overtime, second jobs by that stage it weakens the argument for the potential of their future higher earnings.

Last time I checked a dependent requires a partner, hence another income (though I suppose there could be situations where that isn't the case).

Extra income doesn't have to come from promotions. Do banks really care if you've had pay increases through promotions?

Halifax asked me about pay increases during affordability checks. I told them I was expecting a promotion before the end of the fixed term due to the nature of my career path. They were checking how easily I could afford my repayments after the fixed term if interest rates increase significantly by the time I have to remortgage.

Did you need to prove anything because surely anyone can say that? I don't see how it helps the bank make an informed decision.