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neon tetra

House Prices As A Multiple Of Income...

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Something that has intrigued me for a while....

We are all hoping that prices will return to a 'sensible' multiple of incomes, me included.

Even if mortgages were restricted to, say, 3.5 times income, surely the average house price would remain higher than that? If a 25% deposit were required, then the average house price might be nearer 4.7 times income (75% borrowed at 3.5 times income....).

So are we expecting prices to dip below 4.7 x income, or is this actually the "stable" level....?

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Until the banks are happy that prices aren't going to drop another 25% then they will continue to ask for that deposit.

After that, they may offer 3.5x with only a small deposit.

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Something that has intrigued me for a while....

We are all hoping that prices will return to a 'sensible' multiple of incomes, me included.

Even if mortgages were restricted to, say, 3.5 times income, surely the average house price would remain higher than that? If a 25% deposit were required, then the average house price might be nearer 4.7 times income (75% borrowed at 3.5 times income....).

So are we expecting prices to dip below 4.7 x income, or is this actually the "stable" level....?

I believe the previous 'norm' of 3.5x single income is now gone. The general public have accepted (in their droves!) 6x single income mortgages in the past, and I think we'll end up with something like 4.5x income as the norm going forward.

Have you entered your income into any of the on-line calculators recently? I just punched in a £140k loan on a £190k property, with a £30k income, on the moneysupermarket website. Lot's of hits, with IR's ranging from 1.99 to 5%!

Of course, they may not lead to solid offers from lenders, but the indicators are good!

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Until the banks are happy that prices aren't going to drop another 25% then they will continue to ask for that deposit.

After that, they may offer 3.5x with only a small deposit.

Precisely.

Unless the FSA regulates it. But despite all the signs for it, I'll believe it only when I see it. I really doubt the FSA will impose a maximum of 75% LTV. I think they may, perhaps, at most go for 90%, and most probably with lots of loopholes in it.

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Precisely.

Unless the FSA regulates it. But despite all the signs for it, I'll believe it only when I see it. I really doubt the FSA will impose a maximum of 75% LTV. I think they may, perhaps, at most go for 90%, and most probably with lots of loopholes in it.

This is only factoring market risk, don't forget banks also calculate personal risk too. Mortgage payment history will play a sizable part in future mortgage approvals. Another stick to beat the first time buyer with, the priced out generation could end up becoming the risked out.

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The banks wont put a gun to your head and make you borrow the maximum available to someone on your salary. You are allowed to borrow less.

Exactly. The 3.5 times number is historically the MAXIMUM people used to borrow. (Give or take a few exceptions)

So at a point where interest rates are at an all time low and can only go up ? Where taxes are going to rise for pretty much everyone across the board ? Where job prospects are looking bleak ?

Borrowing anything more than 2.5 your income is a bit mental IMO.

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Unless the FSA regulates it. But despite all the signs for it, I'll believe it only when I see it. I really doubt the FSA will impose a maximum of 75% LTV. I think they may, perhaps, at most go for 90%, and most probably with lots of loopholes in it.

I can see them doing the old 75% LTV, with a separate loan for the deposit.

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  • 244 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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