The 3.5 x Salary ideal - ever realistic again?

Badger_Lady

[sings]
"Depends on the area, my dear! Depends on the aaaareaaaa!"
[/stops singing]

I earn £32k... £112k will buy you a nice 2-bed terrace in the City Centre round my way

SunnySusie

I wish people would stop and think for a minute. Why 3.5x? Why not 3.6 or 3.4? I guess the answer is, in the past, this was a good measure to whether someone could afford to repay the debt or not.

So there are some blindingly obvious things to take into consideration. If tax went up to 90% could you pay back 3.5x your salary? If there are 2 of you earning is the 3.5x the largest + 1 x the smallest (iirc) really a reflection of what you can pay back? If interest rates were 20% could you have a 3.5x salary mortgage? If you have a £100 car loan, a £50 TV service, a £50 gym membership, a £30 phone contract, a big CC bill to pay off, etc could you still afford 3.5x?

And those are just the obvious points! I cant understand why banks should artificially constrain the market with such an arbitary ratio. For the reasons above, and others, 3.5 times is cleary just an old wives tale - sometimes this will be too much, other times too little. It just seems so simple to me and im not that bright lol!

For a practical example look at my own purchase. Me + partner bought at 6x!!! Yet we still have money to overpay the max allowed, we save, we pay our pensions etc. We wanted to buy the house we bought, we can afford it. I would have been mighty annoyed if the bank hadnt taken the one thing that matters into consideration ->affordability!!

The lack of common sense on this is truly frightening. Come on people - free your minds, think for yourrselves! Unless someone can tell me why 3.5 and not a different figure, and please go into detail on why this would be constant when what someone can actually pay back is dependent on so many more things than just their salary!

PasturesNew

Badger_Lady wrote: »

[sings]
"Depends on the area, my dear! Depends on the aaaareaaaa!"
[/stops singing]

I earn £32k... £112k will buy you a nice 2-bed terrace in the City Centre round my way

You live near me. What do you do then?

I don't work because so far I've had just two interviews (both last August), one I never heard from, one gave the job to the MD's brother (newish/small company of two partners doing software work). Since then I've been contacted to ask if I want to be put forward for jobs, and heard nothing back - and I've applied for jobs and heard nothing back.

I moved here because on paper (internet search results) there seemed a lot of jobs I was ideally qualified/experienced for. Getting them, it seems, is a different matter. Applicant overload. (can't be anything wrong with me, I'm perfect!)

[Deleted User]

where do you live PasturesNew?

I guess i do live in world where I don't know anyone who earns < £24k a year. Even our clueless graduates are hired at that rate.

Badger_Lady

Aw, sorry Pastures I was actually relocated here from England, supposedly they couldn't find anyone locally!

I'm an eBusiness Manager, overseeing website developments. I cried tears of joy when I looked in the Estate Agents window here.

PasturesNew

SunnySusie wrote: »

I wish people would stop and think for a minute. Why 3.5x? Why not 3.6 or 3.4? I guess the answer is, in the past, this was a good measure to whether someone could afford to repay the debt or not.

The figure was calculated, sensibly, from the experience of many years' of lending and what people could afford to pay back.

What's changed is that:

1] Historically, interest rates were 8% on average - in recent years they've been lower, people forget quickly.
2] To borrow money they had to see the whites of your eyes - they no longer cared when they stopped lending you THEIR money and simply resold the debt to another company they'd never meet.
3] Because of [2] they got greedy because all of a sudden they were just commision-salesmen selling as many loans as possible, rather than custodians of savers' money.

3.5x salary and taking a view that over the lifetime of a mortgage interest rates would average out to 8% is sensible lending.

abaxas

keren29 wrote: »

Snaggles is an underwriter - probabaly best you do believe her :rolleyes:

You have to laugh. I worked in uk subprime years ago and the only underwriting rule was :

If money can be made by the reposession of the property give loan without asking questions.

This was 1999/2000 btw. I hear they've loosened up a bit since then.

PasturesNew

Badger_Lady wrote: »

Aw, sorry Pastures I was actually relocated here from England, supposedly they couldn't find anyone locally!

I'm an eBusiness Manager, overseeing website developments. I cried tears of joy when I looked in the Estate Agents window here.

If I saw that job title I'd probably apply. But it would depend on the detail of the role specifically if I'd be anywhere near a good fit. Certainly if they listed "degree" I'd not stand a chance. But if they'd mentioned project management, e-project management, website project management, html/css, technical background, IT experience, working with small businesses, marketing, I'd have probably made it to interview.

Every job title has a different set of wants/needs really.

Well done you anyway!

(shhhh .... houses ARE cheap here aren't they!! That's another reason I was drawn to the area... lots and lots of affordable houses.)

Burlesque_Babe

ringo_24601 wrote: »

where do you live PasturesNew?

I guess i do live in world where I don't know anyone who earns < £24k a year. Even our clueless graduates are hired at that rate.

Not the situation in my part of the world unfortunately Secretary's are on 15k-18k and lots of £6.50 per hour temping in offices.

Middle managers aren't on 24k in some sectors in Poole.

PasturesNew

I think I've done most jobs in my life by now .... always adaptable... then you get penalised for having done too much stuff. But you do what you can to get by - and what an employer needs you to do.

You might go into an organisation with a skill, but when you get there you find it's not actually used. And then when you leave there you've not used it for a few years, so the next guy says "Ah, not done that for a few years then!"

You can't win for trying to win sometimes.