If I earn £32k per year

whiteflag_3

That's just silly.3 times salary was based on the old high inflation/ high interest rate days when you were paying 10%, often as much as 15%, interest on the loan.

Hi Ed, good to know your qualified in mortgage lending as well!

So you disagree that that lenders making loans of 5,6,7 times income and self certs have not had a part to play in house price inflation in the UK?.

Why are you so obsessed with people being ripped off with their pensions yet from the tone of your post seem happy that banks are prepared to let their clients get in a position of being financially high and dry?.

Im to young to remember the good old days, but the old folks I come in to contact with tell me that those times werent so bad. Everyone had to save an everyone had to prove they could be financially savy (Before they got into debt). Whats wrong with that?

EdInvestor

Im to young to remember the good old days, but the old folks I come in to contact with tell me that those times werent so bad. Everyone had to save an everyone had to prove they could be financially savy (Before they got into debt).

Did they indeed?

So there were no repossessions whatsoever in the good old days, right? No negative equity? Nobody got into unrepayable debt or lost their home?

You really must be quite young, whiteflag

Robert_Sterling_3

Ember999 wrote:

But at the end of the day, you constantly attack a Building Society that at least allows people the chance to buy their own home.

Northern Rock is not a building society.
Its aim is to make profit for its share holders
whereas the stated aim of Building Societies is to act in the interest of their members.

When I said that "Northern Rock is good at what they do."
I meant that they make good profits.

YorkshireBoy

EdInvestor wrote:

...often as much as 15%...

They were 16% when I took out my first endowment mortgage in January 1982.

whiteflag wrote:

...but the old folks I come in to contact with tell me that those times werent so bad

Well personally, back in the 'old days' of 1982, my £14.9K interest only mortgage at 16% was costing me £198 a month (before MIRAS). My take home pay at the time was £387 per month.

whiteflag_3

You really must be quite young, whiteflag

Ed, Ill tell you how old I am when you start answering the questions i pose to you on this forum.

How many times do meaningfull discussions on these threads come to end with one of your crass comments? ( no answer required

whiteflag_3

So there were no repossessions whatsoever in the good old days, right? No negative equity? Nobody got into unrepayable debt or lost their home?

You tell us Ed, you were obviously around in the late 60s early 70s hence you said

Next you'll be saying we should go back to the old building society cartel days when banks were banned from mortgage lending (I kid you not).

Home ownership was well under 50% of the population back then, and you had to go down on your knees to the BS manager.

meanmachine_2

whiteflag wrote:

If all lenders had stuck to the old 3 times salary rule prices wouldnt be so high.

Bingo! Someone give that man a prize.

If it wasn't for 5.9 times lending and self certs, we wouldn't have had such rampant house price inflation.

If Joe Bloggs physically can't borrow more than 3 times his salary house prices won't be more than three times his salary (plus equity).

It's not rocket science.

I wonder how well NR will do when/if int rates have to go up.

And if I had a perfect credit rating, plus a huge amount of equity, NR would not be top of my list, but there you go...

Phonix

Did you know that in some areas of the country, house prices are 18x the average salary. Obviously the banks don't know this......

The brutal truth is that profit is the over riding factor here.

I didn't think the hints were very subtle.

meanmachine_2

It's thanks to the "bad old days" that the majority of people have such tiny mortgages and are now able to enjoy the fruits of a low interest economy.

House prices were lower, but interest payments were higher. But the loan is still low.

So fast forward 10 years and you have a low loan coupled with a low interest rate. The result? A boom in high street spending.

Except, house prices are through the roof, so the next generation coming up only have the reverse option - huge loan, offset by lower interest payments.

And guess what'll happen should inflation start rising, and interest rates go up.

Give me a choice between a 50K home loan and 10% and £100K home and 5% int and I know which one I'd prefer - I'd also be getting far more interest on my savings, thank you very much.

Joe_Bloggs

Had the original poster, all those many posts ago, had some savings that were close to 5% of the purchase price then the lending to earnings ratio would have been 4.45. A 10% deposit on 150K would have meant a capital borrowed of 150K -15K = 135K. An earnings ratio of 4.21. To get to a mortgage/ earnings /ratio of 3.5 x salary the original poster would need to have a deposit of 38K. These savings amounts are probably not going to happen unless you live in a tent or sponge of family/friends or are advanced in years.

It is unfair to criticise anyone for not saving when the outgoings/ circumstances are not mentioned. Existing savings/equity/ personal outgoings are a factor in what a mortgage lender may lend. Many lenders will still lend with an excess fee or interest penalty for poor equity/deposit to loan ratio.
Northern Rock PLC. have been prominent in their lending. There mortgages are secured against property so they can threaten the outdoors, like any other mortgage lender, to those who cannot maintain the repayments. Clearly they are prepared to lend higher income multiples, take more risk and try to make more profits/gain market share than many other more cautious lenders.

J_B.