Three Times Your Income

[mbga9pgf]

I think you mean the Labourgraph

For the last 2 years the Telegraph has been kissing Brown's ar$e, and knifing the Tories. It's political team was imported en-mass from The Mirror. I stopped buying it ages ago, it got so bad

Its owned my the mail.

I don't think a newspaper that supported Hitler is going left-wing anytime soon...

[Emy74]

Nationwide have lent 4+ times joint mortgages for years now and they have not been bailed out by the government. My understanding is that the Retail parts of all the main banks made money and its the investments sides where the problems have been.

The reality is that there are preople who will borrow 2 times there earning and still lose their homes. Mosts people who I have come across who have lost their house has been down to unsecured debt rather than a simple problem with their mortgage.

I would be amazed if this comes in and whilst it would be great for people like me who have STR'd, there will be people out there who will find themselves in NE for the rest of their lives and country as a whole do not want lower house prices and therefore the Government will not allow it.

[Bloo Loo]

Why restrict borrowing on the second person's income "because an illness might come along"?

If you can't lend someone money as a multiple of their salary because one day they might get ill and not be able to work, then logically you shouldn't lend a single person any money at all, because if they get ill, they have no income at all.

Similar with babies. Should you never lend young women any significant amount on the grounds that "a baby might come along"?

its a natural restriction on womens borrowing and breadwinning capability. And all these income help schemes for fathers and mothers will be scrapped as the economy continues to correct.

[Bloo Loo]

Nationwide have lent 4+ times joint mortgages for years now and they have not been bailed out by the government. My understanding is that the Retail parts of all the main banks made money and its the investments sides where the problems have been.

The reality is that there are preople who will borrow 2 times there earning and still lose their homes. Mosts people who I have come across who have lost their house has been down to unsecured debt rather than a simple problem with their mortgage.

I would be amazed if this comes in and whilst it would be great for people like me who have STR'd, there will be people out there who will find themselves in NE for the rest of their lives and country as a whole do not want lower house prices and therefore the Government will not allow it.

four times joint for a high wage couple is not too different to the old rule of thumb which was 3 times main + 1 times the second, meaning the time whent he second earner was not earning, the mortgage was doable.

most couples do not have equal salaries... for those that do, and have a 4x joint, they face a doubling of mortgage cost against there income.

[MSWHPC]

Gordo can spin it thus, and keep everyone happy.

if you are moving, then the house you are buying will be cheaper too.

fisrt time buyers will now be able to afford houses too.

win. win.

[Wonga]

Nationwide have lent 4+ times joint mortgages for years now and they have not been bailed out by the government. My understanding is that the Retail parts of all the main banks made money and its the investments sides where the problems have been.

The reality is that there are preople who will borrow 2 times there earning and still lose their homes. Mosts people who I have come across who have lost their house has been down to unsecured debt rather than a simple problem with their mortgage.

I would be amazed if this comes in and whilst it would be great for people like me who have STR'd, there will be people out there who will find themselves in NE for the rest of their lives and country as a whole do not want lower house prices and therefore the Government will not allow it.

Depends! Maybe this is the price that has to be paid to return to "normality". Relatively speaking, it would impact on a smaller number of 'voters' than those other 'voters' who are not affected by such a move i.e. those already in deep doo doo would be worth sacrificing for the greater majority. Gordon is running out of time too! Win win

Edited March 16, 2009 by Wonga

[Si1]

I would be amazed if this comes in and whilst it would be great for people like me who have STR'd, there will be people out there who will find themselves in NE for the rest of their lives and country as a whole do not want lower house prices and therefore the Government will not allow it.

this govt are purely reactive now and frightened - they have far less of a clue what is going on than you do. They will do this because it seems like an appropriate thing to do and they feel - subconciously - guilty for not protecting the market 10 years ago, even tho it is just knee-jerk. It is a subconcious over-compensation for historical failure to act. Again, they really do not understand what you do. They are being self-indulgent in their guilt.

[Glass Half Full]

OK ....

So I can borrow (single salary, one income in household) - £480,000.

As a proportion of my outgoings, I see no reason why not to be able to borrow 4-5 times?

3k - 3.5k a month is a lot for some (hell it is a lot for anyone). But it is still perhaps 1/4 - 1/3 of disposible income which makes the 3 * income to be too restrictive for higher than average income

[thecrashingisles]

I would be amazed if this comes in and whilst it would be great for people like me who have STR'd, there will be people out there who will find themselves in NE for the rest of their lives and country as a whole do not want lower house prices and therefore the Government will not allow it.

Anyone left in negative equity 'for the rest of their lives' because of a return to sensible lending multiples must have borrowed far more than they could afford and frankly they deserve any financial hardship that might come to them.

[Jonnybegood]

Why the big fuss about second incomes, illness, babies etc.

A few scenarios -

An unmarried 32 year old female city lawyer earning £80k per annum wants a mortgage for £240k with LTV of 85%.

Yes or no? She may have a baby next year? She may fall ill? She may get the sack? She may want a less pressured lower paying job?

But its ok because she is still only borrowing 3x income and earning a good wage with good career prospects and future earnings.

A married couple in their early 30s want a mortgage, 2 kids aged 5 & 7.

He earns £50k as an electrical engineer and her £45k as a deputy head.

They want a mortgage of £240k with LTV 85%

Yes or no? Not much chance of any more children, both have good jobs and higher than average earnings, secure relationship.

Their mortgage would be 2.5x joint incomes, if one of them falls ill or needs to have time off work then at least they do still have a second income coming in, unlike the 1st scenario.

Finally FTB, early 20s earning £20k per annum wants to buy a house with his partner who also earns £20k.

Wants a mortgage of £100k with 85% LTV.

On his own max mortgage £60k (3x income) with partner £100k (2.5x income).

What is the difference between 2 people buying a property together and a single person buying alone? Especially when both persons are earning similar incomes and buying together gives a lower multiply.

I think that is what this article is about, 3.5x single income or 3x joint and I see no more risk in giving a joint mortgage compared with a single mortgage.

People mention women going off to have children, how about gay couples? Couples who have no intention of ever having children, surely in this day its discrimination against high earning couples who want to buy a property suited to their incomes.

[mbga9pgf]

OK ....

So I can borrow (single salary, one income in household) - £480,000.

As a proportion of my outgoings, I see no reason why not to be able to borrow 4-5 times?

3k - 3.5k a month is a lot for some (hell it is a lot for anyone). But it is still perhaps 1/4 - 1/3 of disposible income which makes the 3 * income to be too restrictive for higher than average income

I am sure you will form part of the exception, especially with a large deposit. But I cant honestly imagine them going above 4X and I imagine the legislation will be written to ensure they have to have evidence in the form of photocopied payslips and a credit history cleaner than the popes sex life to get anywhere...

[Bloo Loo]

Why the big fuss about second incomes, illness, babies etc.

A few scenarios -

An unmarried 32 year old female city lawyer earning £80k per annum wants a mortgage for £240k with LTV of 85%.

Yes or no? She may have a baby next year? She may fall ill? She may get the sack? She may want a less pressured lower paying job?

But its ok because she is still only borrowing 3x income and earning a good wage with good career prospects and future earnings.

A married couple in their early 30s want a mortgage, 2 kids aged 5 & 7.

He earns £50k as an electrical engineer and her £45k as a deputy head.

They want a mortgage of £240k with LTV 85%

Yes or no? Not much chance of any more children, both have good jobs and higher than average earnings, secure relationship.

Their mortgage would be 2.5x joint incomes, if one of them falls ill or needs to have time off work then at least they do still have a second income coming in, unlike the 1st scenario.

Finally FTB, early 20s earning £20k per annum wants to buy a house with his partner who also earns £20k.

Wants a mortgage of £100k with 85% LTV.

On his own max mortgage £60k (3x income) with partner £100k (2.5x income).

What is the difference between 2 people buying a property together and a single person buying alone? Especially when both persons are earning similar incomes and buying together gives a lower multiply.

I think that is what this article is about, 3.5x single income or 3x joint and I see no more risk in giving a joint mortgage compared with a single mortgage.

People mention women going off to have children, how about gay couples? Couples who have no intention of ever having children, surely in this day its discrimination against high earning couples who want to buy a property suited to their incomes.

circumstances my dear watson, circumstances.

the "rules" were rule of thumb.

the pain we saw in 2007 when rates were only at 5.5% was caused by lending over the guide.

if your argument was correct, there would have been no pain, no crash, no bailouts, no bank failures and so on.

[thecrashingisles]

OK ....

So I can borrow (single salary, one income in household) - £480,000.

As a proportion of my outgoings, I see no reason why not to be able to borrow 4-5 times?

3k - 3.5k a month is a lot for some (hell it is a lot for anyone). But it is still perhaps 1/4 - 1/3 of disposible income which makes the 3 * income to be too restrictive for higher than average income

But allowing higher than average loans for people in your pay bracket is actually against your interests because ultimately it results in you paying a much higher price for the same property. This is because everyone else has access to the same buying power as you.

Putting a sensible income related cap on it gives you the freedom to save cash if you want to buy a better property, or spend/invest it on other things if you prefer. It gives you the opportunity to leapfrog people who would otherwise not spend more than 3x income on a house.

[Si1]

Anyone left in negative equity 'for the rest of their lives' because of a return to sensible lending multiples must have borrowed far more than they could afford and frankly they deserve any financial hardship that might come to them.

yep, a return to personal responsibility

[ScaredEitherWay]

It should be 3x one income or 2.5x the joint. Makes it fairer on singles to be able to get somewhere.

[Dr Renter]

yep, a return to personal responsibility

Thank God!!

If this does get passed I can imagine the EA spin....... If you dont buy in the next month you wont be able to get onto the propery ladder for the rest of your life!! And sheeple will believe them.

[Jonnybegood]

circumstances my dear watson, circumstances.

the "rules" were rule of thumb.

the pain we saw in 2007 when rates were only at 5.5% was caused by lending over the guide.

if your argument was correct, there would have been no pain, no crash, no bailouts, no bank failures and so on.

All the documentaries I have watched lately on repossessions and people getting into difficulties is when the household only has 1 bread winner and they suddenly lose their job.

These are often self employed or bonus related jobs where they have been given mortgages of 5-6x single income based on potential earnings that may only happen every few years.

I see nothing wrong in giving a 2.5x joint income mortgage to a couple who have secure jobs with good credit history and stable earnings, like my example of a couple with 2 kids and between them earning just under £100k, how can you ignore someone earning a second income of nearly £50k.

[time 2 raise interest rates]

Dunno what you're all getting hot under the collar for. This is happening now with the 30-40% deposits.

10 years ago all banks would only lend 3 times the average wage. If you had a wonky tile on the roof

or leaves in the gutter the banks would hold funds back until you had rectified the problems. This is

happening now, the banks are doing this of their own accord. Gordon's spinning it so it looks like he's

imposing it, more bollo**s from Labour.

Fact is, the only thing that enable the banks to give high multiple mortgages was their ability to parcel

them up and sell them on as it's now becoming apparent, this practice has blown up the entire world

banking system, never to return.

What bit don't you get? houses will go back to 3 times the average wage on their own accord. Gordon's

just spinning it so it looks like he's enforcing it when the weak sap can't even open a jar of Branston

Pickle without help from the cleaner.

Edited March 16, 2009 by time 2 raise interest rates

[jp1]

Its owned my the mail.

I don't think a newspaper that supported Hitler is going left-wing anytime soon...

The Mail - that'll be the other paper who's editor, Paul [soon to be 'Sir'] Dacre, is so far up Brown's ar$e you can only see his toenails

[Glass Half Full]

But allowing higher than average loans for people in your pay bracket is actually against your interests because ultimately it results in you paying a much higher price for the same property. This is because everyone else has access to the same buying power as you.

Putting a sensible income related cap on it gives you the freedom to save cash if you want to buy a better property, or spend/invest it on other things if you prefer. It gives you the opportunity to leapfrog people who would otherwise not spend more than 3x income on a house.

That is a good point. I think what I am getting at is that there has to be some degrees of freedom around any set of lending criteria.

[scottbeard]

3x earnings on it's own is too simplistic.

3x might be unaffordable for a lower earner who has a greater part of their income spent on essentials. Equally 4x might be affordable for a high earner.

[kzb]

This would be exactly what's needed to get our economy back on track. Even if it's joint income (and I bet it is), that would still be a massive crash in most areas of the country.

But I for one am extremely skeptical this will be brought in as written. Everything they have been doing is aimed at reflating the property bubble, including hundreds of billions given to banks for mortgage lending, so why the about-face now?

[Bloo Loo]

All the documentaries I have watched lately on repossessions and people getting into difficulties is when the household only has 1 bread winner and they suddenly lose their job.

These are often self employed or bonus related jobs where they have been given mortgages of 5-6x single income based on potential earnings that may only happen every few years.

I see nothing wrong in giving a 2.5x joint income mortgage to a couple who have secure jobs with good credit history and stable earnings, like my example of a couple with 2 kids and between them earning just under £100k, how can you ignore someone earning a second income of nearly £50k.

multiples dont come into the equation when the income disappears.

they come into it when "affordability" criteria are used in times of low interest rates.

i agree that many are in differing circumstances, but a rule of thumb and a guide is a good thing. Go way out of line and you need to be pretty sure of what risks you are taking...the problem in the last 10 years has been the absence of consequences and failure to check.

[abharrisson]

I am sure there are a lot of reasons why people leap at earnings multiple limitations being a positive thing.... but I am afraid that my view is that this will not come in at anything like the clear level everyone appears to be clamoring for.... for all sorts of reasons this is spin from the regulator.... I'll bet anyone a virtual tenner that we'll never ever see hard and fast rules over income multiples and mortgage lending coming through.

[contractor]

Surely rather than basing amounts on gross yearly a better idea would be net monthly affordability?

For example max mortgage repayment = 35% of net income of loan requestor(s). The total loan amount is calculated based on this figure and whatever the prevailing interest rate is at the time.