Jump to content
House Price Crash Forum
We're all dooomed!!!

What Are The Current Multiples?

Recommended Posts

Further to a recent bullish post I saw, someone on here suggested that you could buy a property and borrow around 3.5 times salary. I can't believe that this is true at current prices for the majority of people and I will quote my own situation as an example. I am in my mid-thirties and well established in my job. Therefore I earn quite well (ca. 40k a year) and have managed to save a largish deposit (approx 35k). I live on the eastern outskirts of London and feel that at my age and with my financial security I should be able to afford to buy a modest two bed house.

I've just looked on rightmove for 2-bed houses in my area (Hornchurch, Essex). There were 8 properties ranging from 220k to 195k. With this in mind my multiple is somewhere between 4 and 4.5x salary. This is high, although not ridiculously so. But the thing is that I reckon I earn reasonably well and that, even for London, my salary is probably above average. So if the multiple is still too high for me to feel that I want to risk it.....

Would be interested to hear what sort of multiples other people are seeing around the country.

Share this post


Link to post
Share on other sites

Are you single? If you were in a couple I would expect this to be do-able, seeing as you have close to a 20% deposit. As is I suspect you can probably still get a mortgage as you describe, but it won't be at the best rates by any means. If you can get a house for a price such that you have a 25% deposit that will obviously help. They may also lend you more if you agree to take a fixed rate mortgage rather than a floater.

Share this post


Link to post
Share on other sites
Are you single? If you were in a couple I would expect this to be do-able, seeing as you have close to a 20% deposit. As is I suspect you can probably still get a mortgage as you describe, but it won't be at the best rates by any means. If you can get a house for a price such that you have a 25% deposit that will obviously help. They may also lend you more if you agree to take a fixed rate mortgage rather than a floater.

Assuming, of course, they remain childless, and that they both have the good fortune to stay employed i.e. in slavery for the long-term.

AND you didn't answer the OP's question.

Share this post


Link to post
Share on other sites
Further to a recent bullish post I saw, someone on here suggested that you could buy a property and borrow around 3.5 times salary. I can't believe that this is true at current prices for the majority of people and I will quote my own situation as an example. I am in my mid-thirties and well established in my job. Therefore I earn quite well (ca. 40k a year) and have managed to save a largish deposit (approx 35k). I live on the eastern outskirts of London and feel that at my age and with my financial security I should be able to afford to buy a modest two bed house.

I've just looked on rightmove for 2-bed houses in my area (Hornchurch, Essex). There were 8 properties ranging from 220k to 195k. With this in mind my multiple is somewhere between 4 and 4.5x salary. This is high, although not ridiculously so. But the thing is that I reckon I earn reasonably well and that, even for London, my salary is probably above average. So if the multiple is still too high for me to feel that I want to risk it.....

Would be interested to hear what sort of multiples other people are seeing around the country.

It isn't simply about multiples - the lenders are taking into account affordability (what existing debts you have) as well.

4.5 x your salary is quite high though for someone on only 40k; 3.5 x may be more realistic for most lenders.

The easiest way to do this is to go onto a Mortgage Wizard, enter your details and see what is the maximum loan you can have - you can also see if anyone is prepared to lend to you by entering the details of the property you want to buy.

Share this post


Link to post
Share on other sites
Further to a recent bullish post I saw, someone on here suggested that you could buy a property and borrow around 3.5 times salary. I can't believe that this is true at current prices for the majority of people and I will quote my own situation as an example. I am in my mid-thirties and well established in my job. Therefore I earn quite well (ca. 40k a year) and have managed to save a largish deposit (approx 35k). I live on the eastern outskirts of London and feel that at my age and with my financial security I should be able to afford to buy a modest two bed house.

I've just looked on rightmove for 2-bed houses in my area (Hornchurch, Essex). There were 8 properties ranging from 220k to 195k. With this in mind my multiple is somewhere between 4 and 4.5x salary. This is high, although not ridiculously so. But the thing is that I reckon I earn reasonably well and that, even for London, my salary is probably above average. So if the multiple is still too high for me to feel that I want to risk it.....

Would be interested to hear what sort of multiples other people are seeing around the country.

so you have £35K of deposit, and you earn £40K. So you borrow 3.5times - that prices what you are happy to pay as £175K (at 3.5times). not a million miles away. Now think about what happens when you have two salaries coming in - these damned infernal women just keep wanting to have jobs - you (together) still only need a two bed house - so what do you do, oh yes, you see a house you want and you can afford to pay more........ so you do.

The average mortgage is apparently £68K (but a third of the housing stock is unmortgaged), the average household income in the UK (inc benefits) is apparently £28.5K. Back of a fagpacket gets me to just over 2 times multiple - but that includes all the people who have had their mortgage ages.

My first mortgage was 4X (0% deposit), next was 3.5X (20% deposit (most of which was earned, not equity BTW), then I went to 4X my basic wages (about 3.5X with bonuses) - it's now just under 1X our combined income (5 years later).

Share this post


Link to post
Share on other sites
Are you single? If you were in a couple I would expect this to be do-able, seeing as you have close to a 20% deposit. As is I suspect you can probably still get a mortgage as you describe, but it won't be at the best rates by any means. If you can get a house for a price such that you have a 25% deposit that will obviously help. They may also lend you more if you agree to take a fixed rate mortgage rather than a floater.

I am single yes. I am very uncomfortable borrowing more regardless of whether the bank would lend me it - jobs in the financial sector where i work are not the most secure recently you may have noticed (and should I tie myself to a mortgage which doesn't allow me to live at all anyway???) I think you hit the nail on the head with the deposit issue except I doubt you would agree with my take on the problem - 25% is around £50k deposit. This is way above what I have but more than anything suggests that the property is too expensive anyway. What are multiples like for FTBs in your area?

Share this post


Link to post
Share on other sites
I am single yes. I am very uncomfortable borrowing more regardless of whether the bank would lend me it - jobs in the financial sector where i work are not the most secure recently you may have noticed (and should I tie myself to a mortgage which doesn't allow me to live at all anyway???) I think you hit the nail on the head with the deposit issue except I doubt you would agree with my take on the problem - 25% is around £50k deposit. This is way above what I have but more than anything suggests that the property is too expensive anyway. What are multiples like for FTBs in your area?

You say you are mid 30's. I presume you started work at 21 (on graduating). In that time, you've saved about £45-50 a week (plus interest). What have you been doing with the rest of it (did it go on further professional fees, student debt, strippers ?)

Share this post


Link to post
Share on other sites
What are multiples like for FTBs in your area?

It doesnt matter what area you live in - lenders base a mortgage on your salary and outgoings irrespective of where you live.

For example - if you go to a branch of Lloyds in London and request a mortgage quote you will get exactly the same quote as from a Lloyds branch in Manchester.

Share this post


Link to post
Share on other sites
You say you are mid 30's. I presume you started work at 21 (on graduating). In that time, you've saved about £45-50 a week (plus interest). What have you been doing with the rest of it (did it go on further professional fees, student debt, strippers ?)

Started work at 18 actually - I've only been earning this sort of money for the last 3 or 4 years. Prior to that my salary was much more modest of course. Of course I've had holidays and cars and the like (although not to excess) - strange decision - when I was in my twenties I decided to 'have a life'!! :P

Share this post


Link to post
Share on other sites
You say you are mid 30's. I presume you started work at 21 (on graduating). In that time, you've saved about £45-50 a week (plus interest). What have you been doing with the rest of it (did it go on further professional fees, student debt, strippers ?)

Oh come on, that's a bit rude.

Some people want to do other things than just pile the money high in a savings account, e.g. travel, have a car etc etc, all of which costs money, but gives you other things in return.

Life shouldn't be just about purchasing a house, no?

Share this post


Link to post
Share on other sites

Most FTBs have less than 25% deposit imo, so not much point comparing to that.

For your level of deposit most lenders will be looking to get themselves comfortable on an affordability basis. They probably will want you to spend no more than 40% of your net wage on your mortgage. That should give you a max loan of around 185,000 based on current market rates. That's 4.6x salary. If you have other significant outgoings that will obviously adjust it down a lot.

Share this post


Link to post
Share on other sites
It doesnt matter what area you live in - lenders base a mortgage on your salary and outgoings irrespective of where you live.

For example - if you go to a branch of Lloyds in London and request a mortgage quote you will get exactly the same quote as from a Lloyds branch in Manchester.

Yes, but the price of the house will be different and presumably the amount I can earn working in Manchester is different from London?

Share this post


Link to post
Share on other sites
Oh come on, that's a bit rude.

Some people want to do other things than just pile the money high in a savings account, e.g. travel, have a car etc etc, all of which costs money, but gives you other things in return.

Life shouldn't be just about purchasing a house, no?

Right, but now you're mid 30's and got £35K to show for it and a house is far less affordable. It does sort of beg the question of whether people have the right balance or just expect to have things at a certain point because, well, we just expect.

If you want to travel or have a nice car, then fine, but then the reason you're looking at a starter home approaching 40 may be linked to your earlier decisions :)

I know that seems a bit blunt and unfair, but it's not (IMO obviously). I currently drive a car that's worth less than 0.5% of my house value, the missus car's barely worth 1.5% of the house value. I've put off buying the toys that I really wanted until I was a bit older, so that we can get the house paid for so we can relax when we don't want to be killing ourselves at work (in our late 30s and 40s). It's horses for courses, but I find it odd when people who have done what they want for a long time then start (not saying the OP is, but lots of people do) moan about house prices and multiples, when they could have done so much about it when they were busy finding themselves whilst drinking, smoking and shagging their way round S Asia and Australia....

Edited by Rachman

Share this post


Link to post
Share on other sites

Tha's a very high single income so you should be able to afford a nice house in Hornchurch,

But your 35K deposit is only 17.5% for a 200K property just for my perspective and best deals

would start at 25% or so.

If you can get a 5 year fix @ 5% or close to it, and £50,000 in cash up front plus £5,000 for costs

with 75% LTV then you could get a nice 2 bedroom terrace house.

Which doesn't seem that good for the amount of capital and post tax income.

Share this post


Link to post
Share on other sites
Right, but now you're mid 30's and got £35K to show for it and a house is far less affordable. It does sort of beg the question of whether people have the right balance or just expect to have things at a certain point because, well, we just expect.

If you want to travel or have a nice car, then fine, but then the reason you're looking at a starter home approaching 40 may be linked to your earlier decisions :)

Seems to me that people with a property have been borrowing themselves to the hilt to do all this anyway. To be honest I have been pretty sensible compared to lots of people I know. I do actually have some more savings but strangely enough i want to keep them (I know it might seem odd that I don't want to poor them all into the same bucket and b**ger it all!)Maybe I made a bad decision not getting on the property ladder eight odd years ago but to be looking at either a shoebox flat for a reasonable risk or a mortgage the size of russia for somewhere decent doesn't seem exactly right.

Share this post


Link to post
Share on other sites
Now think about what happens when you have two salaries coming in - these damned infernal women just keep wanting to have jobs - you (together) still only need a two bed house - so what do you do, oh yes, you see a house you want and you can afford to pay more........ so you do.

Then the damned husseys start having children and you need a 3-4 bedroom house instead, but her income has dropped right off because she's only working part time and most of what she does earn goes on child care.

So now you're supporting a family of 5 in a 2 bed house that's worth £80,000 less than you paid for it and only now do you realise why people thought that a 2 bed terrace at 6x average full time income was unaffordable.

Share this post


Link to post
Share on other sites
Are you single? If you were in a couple I would expect this to be do-able, seeing as you have close to a 20% deposit. As is I suspect you can probably still get a mortgage as you describe, but it won't be at the best rates by any means. If you can get a house for a price such that you have a 25% deposit that will obviously help. They may also lend you more if you agree to take a fixed rate mortgage rather than a floater.

Mate its not a floater try variable, tracker, SVR, discount.

Some lenders will lend more if you take 5 year fix

A couple of lenders still offering 5 x joint

Share this post


Link to post
Share on other sites

You could always "solve" all your problems, and, to be able to "afford" your sh1tty property, [dog-box/slave kennel].... you could opt for that simple, easily available, nay.... OMNIPRESENT NECESSITY.......

.......... You've guessed it........ :lol::P ............. a

LIAR LOAN!!

B):D:D:D

Edited by eric pebble

Share this post


Link to post
Share on other sites
Seems to me that people with a property have been borrowing themselves to the hilt to do all this anyway. To be honest I have been pretty sensible compared to lots of people I know. I do actually have some more savings but strangely enough i want to keep them (I know it might seem odd that I don't want to poor them all into the same bucket and b**ger it all!)Maybe I made a bad decision not getting on the property ladder eight odd years ago but to be looking at either a shoebox flat for a reasonable risk or a mortgage the size of russia for somewhere decent doesn't seem exactly right.

I think people have always spent a lot of their income on their mortgage - the multiple may have been lower, but the payments probably weren't. The multiple model itself is a blunt tool for what can be a fairly sophisticated decision - being single and basing your affordability on your earnings alone makes it easier (I am assuming you're a bloke and not going to have to give up work for childcare anytime soon.... :) ). If you don't drink a lot, then your model will be different than people who blow £200 a week down the pub/club, if you don't drive much or like driving that much, then you won't be having £20K out on a nice car, if you don't smoke, etc. etc.....

If you're not chucking all your eggs in one, I'd say you are being fairly sensible. I'd say the same to you as to the two girls in my team who are currently looking to buy and have money (deposit) burning a hole in their pocket. If you see a property you love and will stay in, buy it, if you just want a house for a few years, don't bother for a while, just rent as they aren't getting more expensive for a while yet and there's a good chance they could get a lot cheaper. [usual caveats about if this lunatic government devalue your cash by inflationary decisions....]

Share this post


Link to post
Share on other sites

A house wouldn't always be regarded as a "first time buyer property", I bought at the bottom of the last crash and considered myself very lucky that I could buy a 2 bed flat instead of a 1 bed one.

You could always look further afield, plenty of 2 bed houses in Southend for under 150k.

You'd be best off waiting; if we are at bottom prices won't rise appreciabbly for months (probably years), if we aren't you'll be able to get what you want cheaper in a few months.

Share this post


Link to post
Share on other sites
Right, but now you're mid 30's and got £35K to show for it and a house is far less affordable. It does sort of beg the question of whether people have the right balance or just expect to have things at a certain point because, well, we just expect.

If you want to travel or have a nice car, then fine, but then the reason you're looking at a starter home approaching 40 may be linked to your earlier decisions :)

I know that seems a bit blunt and unfair, but it's not (IMO obviously). I currently drive a car that's worth less than 0.5% of my house value, the missus car's barely worth 1.5% of the house value. I've put off buying the toys that I really wanted until I was a bit older, so that we can get the house paid for so we can relax when we don't want to be killing ourselves at work (in our late 30s and 40s). It's horses for courses, but I find it odd when people who have done what they want for a long time then start (not saying the OP is, but lots of people do) moan about house prices and multiples, when they could have done so much about it when they were busy finding themselves whilst drinking, smoking and shagging their way round S Asia and Australia....

later that day at the local tv store......look at this 50" beauty.......how much is it darling?.........2 seconds i'll just work it out...........its 0.3% of the value of our house but if we get the dvd and surround sound its only 0.35%

nob

Edited by scottw

Share this post


Link to post
Share on other sites
Most FTBs have less than 25% deposit imo, so not much point comparing to that.

For your level of deposit most lenders will be looking to get themselves comfortable on an affordability basis. They probably will want you to spend no more than 40% of your net wage on your mortgage. That should give you a max loan of around 185,000 based on current market rates. That's 4.6x salary. If you have other significant outgoings that will obviously adjust it down a lot.

Most FTBs have less than 10% deposit actually.

To be precise, only 1 in 10 has at least 10%.

Share this post


Link to post
Share on other sites
I think people have always spent a lot of their income on their mortgage - the multiple may have been lower, but the payments probably weren't. The multiple model itself is a blunt tool for what can be a fairly sophisticated decision - being single and basing your affordability on your earnings alone makes it easier (I am assuming you're a bloke and not going to have to give up work for childcare anytime soon.... :) ). If you don't drink a lot, then your model will be different than people who blow £200 a week down the pub/club, if you don't drive much or like driving that much, then you won't be having £20K out on a nice car, if you don't smoke, etc. etc.....

If you're not chucking all your eggs in one, I'd say you are being fairly sensible. I'd say the same to you as to the two girls in my team who are currently looking to buy and have money (deposit) burning a hole in their pocket. If you see a property you love and will stay in, buy it, if you just want a house for a few years, don't bother for a while, just rent as they aren't getting more expensive for a while yet and there's a good chance they could get a lot cheaper. [usual caveats about if this lunatic government devalue your cash by inflationary decisions....]

Obviously understand that affordability is the key but multiples against income are a factor in this. If I were to borrow what I can I could have the house I wanted (although being single I'd also have to take out insurance against redundancy - I gather that isn't cheap). The question is whether its a sensible decision. High multiples suggest big affordability problems to me. I can't imagine that the situation is much better for many people and must lead to at least long term price stagnation and more likely falls in prices (simply because lenders won't risk lending a very high multiple in the current market - and nor should they!)

Share this post


Link to post
Share on other sites
later that day at the local tv store......look at this 50" beauty.......how much is it darling?.........2 seconds i'll just work it out...........its 0.3% of the value of our house but if we get the dvd and surround sound its only 0.35%

nob

A, It's knob, B, my point was that many people spend far far more than they should on things that depreciate like cars or that they will see no value back from - and the usual barometer (on this site) is what they are in relation to their house. It's also a much better way of putting it than simply sticking numbers in the 'equation'.

It also gives a sense of 'relative' values. but no, go on, contine posting semi-illiterate abuse.

BTW, you either live in a cheap house or it's an expensive telly.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   285 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.