28/36 Rule

Ksw3

It makes me feel better about our soon to be mortgage being 31% of our gross income (we have no debt) but not sure there's any compelling reasons why they chose 28/36. We have no dependants for example so that would change the % we could afford.

MobileSaver

thegentleway said:

bouicca21 said:

If I’d gone for 25% on mortgage I’d never have had a house; I too am a survivor of the days of 17% interest rates.  Conversely I don’t do debt, so 36% is meaningless for me.

It does highlight that housing is too expensive in the U.K.!

Since roughly 100,000 people buy a house in the UK every single month it clearly doesn't highlight anything of the sort!

BikingBud

MobileSaver said:

thegentleway said:

bouicca21 said:

If I’d gone for 25% on mortgage I’d never have had a house; I too am a survivor of the days of 17% interest rates.  Conversely I don’t do debt, so 36% is meaningless for me.

It does highlight that housing is too expensive in the U.K.!

Since roughly 100,000 people buy a house in the UK every single month it clearly doesn't highlight anything of the sort!

The fact that you have to pay for something, possibly meaning you cannot afford those other elements that you would like within your life, doesn't make it cheap!

Many many more are having to pay higher prices for fuel and energy and food due to inflation, does that mean they are not expensive either.

ProDave

When I had a mortgage, my rule was NO OTHER DEBT WHATSOEVER.  If I could not afford it, I did not buy it.

MobileSaver

BikingBud said:

MobileSaver said:

thegentleway said:

bouicca21 said:

If I’d gone for 25% on mortgage I’d never have had a house; I too am a survivor of the days of 17% interest rates.  Conversely I don’t do debt, so 36% is meaningless for me.

It does highlight that housing is too expensive in the U.K.!

Since roughly 100,000 people buy a house in the UK every single month it clearly doesn't highlight anything of the sort!

The fact that you have to pay for something, possibly meaning you cannot afford those other elements that you would like within your life, doesn't make it cheap!

No-one said property was cheap but if every single month 100,000 people are able to afford to buy then it's clearly not too expensive.

TonyTeacake

user1977 said:

thegentleway said:

user1977 said:

thegentleway said:

What do people think of max 28% of gross income on mortgage/rent and 36% on total debt servicing?

I would think "where did you get that rule from", because I've never heard of it before. Care to elaborate?

It’s on investopedia. Dave Ramsey and the money guys show have 25% rule for housing. 

Never heard of him. A quick glance at his Wiki entry suggests he's some sort of bigoted American.

Yes, he has a channel on youtube. He is based in the USA. I remember him saying in the mid-2000s there was no way the property market would crash.