Jump to content
House Price Crash Forum
interestrateripoff

Do The Banks Affordability Calculations Take Into Account Tax Benefits

Recommended Posts

I'm been wondering if the affordability criteria banks have run to ensure people can afford to repay have modelled in such things like child tax credit, child benefit etc.....

Assuming they have clearly this is one massive failure of risk management because the assumption clearly was that these benefits would continue. If they are modified in any way surely the lower earning middle classes are at huge risk of being up sh1t creek without a paddle. Suddenly there nice affordable loans are going to become more difficult to repay.

Can anyone shed any light onto what our glorious banks have done in these wonderful affordability models. Seeing as the BoE have total faith in what the banks have done and see no need to have their own models to see what happens if they move interest rates up.

Share this post


Link to post
Share on other sites
I'm been wondering if the affordability criteria banks have run to ensure people can afford to repay have modelled in such things like child tax credit, child benefit etc.....

Assuming they have clearly this is one massive failure of risk management because the assumption clearly was that these benefits would continue. If they are modified in any way surely the lower earning middle classes are at huge risk of being up sh1t creek without a paddle. Suddenly there nice affordable loans are going to become more difficult to repay.

Can anyone shed any light onto what our glorious banks have done in these wonderful affordability models. Seeing as the BoE have total faith in what the banks have done and see no need to have their own models to see what happens if they move interest rates up.

Yes i think they do. When we were looking for a new mortgage they asked how much child benefit/tax credit we got to give our total income. I questioned it as we don't count it as income and put it aside separately for when the boys need shoes etc i don't ever count it as money for us to spend on basic living costs. The bank however did and included it in the calculation. Thankfully i found hpc and str instead.

I know lots of people who do rely on the tax credits and they earn decent money. It equals about £45pm for the basic.

Share this post


Link to post
Share on other sites

A single mum in a job paying £6p/h gets a £100k mortgage (90%ltv) by one of the bailed out banks.

All down to tax credits!

Edited to add: They ignored the fact that tax credits are used to cover fees of afterschool club!

Edited by Nick Dastardly

Share this post


Link to post
Share on other sites

So have the banks factored in what will happen if these benefits get pulled? It sort of seems a Miras by the back door for the banks.

People given money to help with bringing up Children and the bankers have helped themselves to the cash.

Share this post


Link to post
Share on other sites
It sort of seems a Miras by the back door for the banks.

Many moons ago I started a thread a thread suggesting that very hypothesis and I was derided by most quarters.

I still think it affects the market in this way.

Share this post


Link to post
Share on other sites

WTC should be the first port of call for a new Tory government...... but for the damage it would do to the housing market. So can't be done.

Oh well, how about cutting housing benefit? I can see some problems there too....

Maybe printing money was the best idea all along.

Share this post


Link to post
Share on other sites

Well Technically the Tax Credit is a offset, as Most lenders when they ask how many dependents do you have, the system deems a figure that you would need to raise a child on a monthly basis. For example £170 per child. This is then taken off your desposable income and gives you a Loan amount.

Share this post


Link to post
Share on other sites
WTC should be the first port of call for a new Tory government...... but for the damage it would do to the housing market. So can't be done.

Oh well, how about cutting housing benefit? I can see some problems there too....

Maybe printing money was the best idea all along.

yep, the best outcome for most people on this site and the UK's long term health is the time when the IMF are called in, its just a matter of being patient and waiting for it to happen as its inevitable

Share this post


Link to post
Share on other sites
Many moons ago I started a thread a thread suggesting that very hypothesis and I was derided by most quarters.

I still think it affects the market in this way.

Do you know where the thread is?

WTC should be the first port of call for a new Tory government...... but for the damage it would do to the housing market. So can't be done.

Oh well, how about cutting housing benefit? I can see some problems there too....

Maybe printing money was the best idea all along.

It would also do serious damage to the banks balance sheets meaning another bailout.

It's catch 22.

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:   295 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.