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Still Lending High Multiples

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Mate’s just been offered a Halifax 5.5x salary with a 15% deposit at 6.19%. So much for limiting the income multiples and high deposits. Okay seriously, if this is still happening coupled with ultra low interest rates and greedy f*ck bag sellers… Realized big drops no time soon.

Another mate said he won’t sell his flat for less than £300k (Streatham) Peak price £270k. He will want to upgrade to a house In the next few years. Why would he want his flat to be worth 100k more if the house he'll want to buy will be 200k more? He’s an IFA by the way…

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Mate’s just been offered a Halifax 5.5x salary with a 15% deposit at 6.19%. So much for limiting the income multiples and high deposits. Okay seriously, if this is still happening coupled with ultra low interest rates and greedy f*ck bag sellers… Realized big drops no time soon.

Another mate said he won’t sell his flat for less than £300k (Streatham) Peak price £270k. He will want to upgrade to a house In the next few years. Why would he want his flat to be worth 100k more if the house he'll want to buy will be 200k more? He’s an IFA by the way…

Is this a standard product or was he offered it one off?

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Guest theboltonfury
Mate’s just been offered a Halifax 5.5x salary with a 15% deposit at 6.19%. So much for limiting the income multiples and high deposits. Okay seriously, if this is still happening coupled with ultra low interest rates and greedy f*ck bag sellers… Realized big drops no time soon.

Another mate said he won’t sell his flat for less than £300k (Streatham) Peak price £270k. He will want to upgrade to a house In the next few years. Why would he want his flat to be worth 100k more if the house he'll want to buy will be 200k more? He’s an IFA by the way…

A perfect example of why we are a nation of financial spaffers. When the advisors are the thickest of the lot, what hope do we have?

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At least requiring a fifteen percent deposit rules out half the numpties.

5.5 x salary ? :o:huh::o Are they mad?

So is that fixed for a certain time period?

To do this I suppose he and the banks both must think that in the next ten to twenty years the base rate will never go above 5 or so percent again?

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To do this I suppose he and the banks both must think that in the next ten to twenty years the base rate will never go above 5 or so percent again?

Considering the debt mountain that's a pretty safe bet. There is no way interest rates can go above 5% without wage inflation to pay for it.

But high interest rates prevent wage inflation right?

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Considering the debt mountain that's a pretty safe bet. There is no way interest rates can go above 5% without wage inflation to pay for it.

But high interest rates prevent wage inflation right?

Do high interest rates prevent wage inflation? I'm not an economist.

I can't see how this inflating away our debts theory would work. If inflation starts to take off, they'd have to do something about it, i.e. raise the rates , and then people with debts will be paying more. If they don't raise the rates, the government wouldn't be able to borrow.

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Mate’s just been offered a Halifax 5.5x salary with a 15% deposit at 6.19%. So much for limiting the income multiples and high deposits. Okay seriously, if this is still happening coupled with ultra low interest rates and greedy f*ck bag sellers… Realized big drops no time soon.

Basically --- just another form of a

LIAR LOAN

It's a LIE that this is "affordable"...

Looks like nothing much has changed. The Moneylenders HAVE TO lend like this [i.e. fraudulently] because THIS IS THE ONLY WAY PEOPLE CAN "AFFORD" property today....

Staggering. Shocking. Depressing.

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A perfect example of why we are a nation of financial spaffers. When the advisors are the thickest of the lot, what hope do we have?

You have no idea. He has a whole world of “Brentinisms†for starters….

“How much did your mate pay for his new build in Wandsworth?â€

“I don’t know but it’s pretty irrelevant with these type of properties†WTF?!

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At least requiring a fifteen percent deposit rules out half the numpties.

5.5 x salary ? :o:huh::o Are they mad?

So is that fixed for a certain time period?

To do this I suppose he and the banks both must think that in the next ten to twenty years the base rate will never go above 5 or so percent again?

I don’t know I think 15% is fairly low coupled with 5.5x earnings, not worried about further falls? I guess the IR isn’t keen but still.

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I think you answered your own question, dude

Bless him. You should hear his spiel, sounds like he’s learned a script. He really should have a better understanding of the wider economy. I shouldn’t take the p*ss too much he’s going to be my best man!

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Mate’s just been offered a Halifax 5.5x salary with a 15% deposit at 6.19%...

Beautiful. Is he paying the mortgage all by himself? If so, assuming his average tax rate is around 33% & he spends around 10% of his gross pay on general 'subsistence' items like food & so on, mortgage payments will account for a little over 85% of his pay after tax & subsistence costs. A two percentage point increase to the interest rate he pays would push that figure past the 100% mark.

...Another mate said he won’t sell his flat for less than £300k (Streatham) Peak price £270k. He will want to upgrade to a house In the next few years. Why would he want his flat to be worth 100k more if the house he'll want to buy will be 200k more? He’s an IFA by the way…

Most of the detail you provided there was irrelevant to a degree, you'd have done just as well to have said simply "Another mate said won’t sell his flat."

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Basically --- just another form of a

LIAR LOAN

It's a LIE that this is "affordable"...

Looks like nothing much has changed. The Moneylenders HAVE TO lend like this [i.e. fraudulently] because THIS IS THE ONLY WAY PEOPLE CAN "AFFORD" property today....

Staggering. Shocking. Depressing.

So begs the questions… If high multiples and low ish deposits are holding (sort of) up the lower end and higher up low IR’s stopping forced sales and a ‘If I don’t need to sell I won’t sell’ mentality when’s it going to change? The only thing surely is a massive hike in Interest rates? What would the REALISTIC combination need to be? High unemployment (3m? ) alone probably won’t do it. It can’t be before the election now?

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Beautiful. Is he paying the mortgage all by himself? If so, assuming his average tax rate is around 33% & he spends around 10% of his gross pay on general 'subsistence' items like food & so on, mortgage payments will account for a little over 85% of his pay after tax & subsistence costs. A two percentage point increase to the interest rate he pays would push that figure past the 100% mark.

Yup --- Many, many people are teetering on the edge of the abyss.......

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The whole loan to income thing is incredible isn't it, a classic case of the emperors new clothes.

The recent CML figures said:

The data also provides evidence that mortgage lenders are continuing to apply tougher lending criteria. The average loan to value for loans to home-movers was 67 per cent down from 72 per cent in April last year and even down on the March figure of 70 per cent while lenders were only prepared to lend an average of just 2.63 times a borrower’s income.

Now you ALL know that the Halifax figures show that at peak the average loan to income was nearly 6x's.

Yet the CML had the average at peak at about 3.25!!

Now we are being told the average is 2.63!!! Do your maths to see how true this is!!

As you all know the FSA are considering putting a cap on mortgage lending and Lord Turner said that he would cap lending at 3x's loan to income to stop another bubble. But according to the CML figures lending WAS at 3x's loan to income at the peak of the bubble!!!

The IPPR have also recommended caps at 3.5.

Meanwhile the madness of the bubble continues with the likes of Hamish singing its praises whilst the country sinks ever deeper into debt, but perhaps not for too much longer. The quote below was from an article at the time of the FSA review:

The problem, according to a range of economists surveyed by The Daily Telegraph, is that the rise in house prices in recent years was due less to supply and demand fundamentals the famous mismatch between the paucity of new homes being built and the glut of people wanting to buy than to the cheap availability of mortgages. If, as some suspect, this credit super-boom will be followed by a long-term drought, whether because banks simply do not recover fully or because the Government imposes new regulations on lending, the implication may be that house prices simply never recover.

Given that Lord Turner's review last week mooted the possibility of a limit for loan-to-value ratios, Capital Economics founder Roger Bootle says: "What Lord Turner is suggesting seems to be a recipe for much lower house prices."

It was said this week with regards his annual address to the City of London that :

Darling will say banks cannot go on as usual and that everyone has to learn the lessons of the last two years that have seen the global financial system to its knees.

"Anyone who thinks that we can carry on as if nothing has happened should think again. In every country we are paying a huge price for this crisis. Not just the financial cost but also a profound social and human cost," he will say, according to extracts released by the Treasury on Tuesday. .....

....Darling will call for tighter regulation not just in Britain but also around the world, arguing all institutions with the potential to destabilise the financial system should be regulated, whether they are banks or insurers.......

....."This crisis has taught us that it is not enough to pass an individual firm as healthy. Regulators and central banks need to look more carefully at the system as a whole," he will say.

Will regulation come, who knows, I want to say "I doubt it", because the country is run by people like Hamish, but the more optimistic side of me says YES of course it will.

Edited by Sybil13

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Will regulation come, who knows, I want to say "I doubt it", because the country is run by people like Hamish, but the more optimistic side of me says YES of course it will.

As always you fail to understand reality.

The bottom 30% of earners do not buy houses, they live in council/social houses.

The average income of actual house buyers is far higher than that of the total population.

That is why the CML figures never crossed 3.5 times income even at peak.

And that is why LTI figures will never drop as far as you want. Even if banks restricted LTI's, there are enough high earners around to support the market as is.

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As always you fail to understand reality.

The bottom 30% of earners do not buy houses, they live in council/social houses.

The average income of actual house buyers is far higher than that of the total population.

That is why the CML figures never crossed 3.5 times income even at peak.

And that is why LTI figures will never drop as far as you want. Even if banks restricted LTI's, there are enough high earners around to support the market as is.

The problem with your argument is is that if that were true why would lenders still be needing to lend such high multiples?

Why would Halifax have had an average loan to income multiple of nearly 6x's at peak?

I know CML figures are based not on average wages but on average income of those who bought property, but the fact is people are having to borrow large multiples still to be able to afford properties and that situation , regardless of whether you like it or not is just not sustainable.

I have over the months read all the arguments about why you think sustainable recovery does not suit your ends but thank heavens the world is changing and I have a feeling that this time the situation is going to force us to consider what best serves the interests of the whole.

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And that is why LTI figures will never drop as far as you want. Even if banks restricted LTI's, there are enough high earners around to support the market as is.

House sales are at the lowest level since records began. So clearly they are not supporting the market.

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Guest An Bearin Bui
Mate’s just been offered a Halifax 5.5x salary with a 15% deposit at 6.19%. So much for limiting the income multiples and high deposits. Okay seriously, if this is still happening coupled with ultra low interest rates and greedy f*ck bag sellers… Realized big drops no time soon.

Ultra-low interest rates? Your friend was offered 6.19% which is a whopping 5.69% over the base rate. I wouldn't call that an ultra-low interest rate: that's a mug's rate, which the bank is profiteering from. Anyone buying at that rate needs their head looked at. In the boom the rates weren't that high, except around 2007 when rates were rising and even then everyone was complaining about "high" rates at the time. If anything, your friend's example proves only that rates haven't come down at all for most buyers, except those on tracker deals from a couple of years ago.

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Basically --- just another form of a

LIAR LOAN

It's a LIE that this is "affordable"...

Looks like nothing much has changed. The Moneylenders HAVE TO lend like this [i.e. fraudulently] because THIS IS THE ONLY WAY PEOPLE CAN "AFFORD" property today....

Staggering. Shocking. Depressing.

Sorry but you're wrong here. Why is 5.5x a liar loan ? You are making sweeping generalisations without true regard to what might be the facts.

Also your signature needs to be shortened as once you've read it once it is a real pain trying to keep on scrolling past it time and time again.

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Sorry but you're wrong here. Why is 5.5x a liar loan ? You are making sweeping generalisations without true regard to what might be the facts.

Also your signature needs to be shortened as once you've read it once it is a real pain trying to keep on scrolling past it time and time again.

when you've been speaking the truth on this site for as long as Mr Pebbles has, your signature can be as long as you like.

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