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Mortgage Criteria

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I've been looking at the effect of loans on mortgage lending criteria today as i'm considering a new car on finance (no debates on this - not relevant to topic). In the past it used to be that they would work out your annual payments and take that off your salary before applying the multiplier. Looking at the nationwide calculator they now multiply your annual loan repayments by 3.3 before removing from your salary and then applying the multiplier (about 3.9 at the moment). I don't know if this is just nationwide or across the board, but they are really hammering extra debt!

There has been talk of fixing the salary multiplier, does anyone have any news on if this might happen and when and to what value?

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I suppose a multiplier of 1.66 might be reasonable in terms of assuming the tax paid on those earnings but 3.3?

Do they think that people have twice as much debt as they declare?

Or that buyers are just waiting to get a mortgage and will then take out further unsecured debt for furntiure/improvements etc? As the buyers need more money or were trying to paint a pretty picture ont he application? And the bank just wants to get in first?

Does this multiplier assume available balances on credit cads and overdrafts? Not in debt but the door is open to use them?

Are student loans included in the sums? Does the multiplier make an assumption for those?

Otherwise I can't see why banks would be worried, even if there were second charges on the property from other lenders, the bank would get their money back first wouldn't they?

Edited by daiking

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interesting development.the continuing delevering of balance sheets continues despite all the vague promises of credit expansion.

Yes exactly. One should also point out bad news for HPC STRers who think they'll be snapping up a bargain in a couple of years with a hefty mortgage. Sheesh they're gonna in for a nasty surprise when the banks aren't lending 'cos they're bust.

Looks like their dream of swooping for Barratt home a la 1995 will be just that, a dream. Unless they can buy it only borrowing 20%. I've seen the future and it's Japanese yipeeeee :rolleyes:

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I've also checked hsbc. Theirs is harder to work out, but seems to be 3.5 income multiple. If no debts and a 75% LTV or less then becomes 3.65x. Having debts seems to reduce multiplier to 3.25x and the reduction is only slightly higher than annual payments.

These do not include student loans.

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Would be nice to know the sums bhind it.

I've had a go. Using my finances high salary, no debt I could borrow about 3 times.

I put in a 20K deposit but in reality its going to be a lot higher.

Then I had a go, using some of my friends typical finaces (there are ones whose finances I know - griping i nthe pub and all that): averagish salary (24K), car loan (9K), misc montly outgoing (CSA/student loan) 300, uncleared credit cards 5K.

Although much too much debt for me they are pretty typical of most mid-30 blokes I know.

I put 5K as a deposit - althogut it would these people about 3 years of hard saving/extreme (for them) life style changes to achive that. £300/month, allowing for some misses/crisis.

I got the grand total of a max 22K mortgage.

Wow! Housing is scr*wed.

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i've just tried the "HSBC see how much you can borrow" calculator

based on 2 mortgagees one earning £25k with no debt and monthly expenditure of £250, with the second on £22k with a monthly expenditure of £250.

25 year term

holding a deposit of £10k

max loan is £90k = 90% LTV

if i up the deposit to £20k it goes up to £143k with a LTV of 88%

then i thought for a laugh i'd keep upping the deposit, i upped to £30k, loans stays at £143k LTV lowers,, £100k, Stays at £143k with a LTV of 59%

seems like they wanted to keep it at 3.04x salary maximum

if i change the monthly expenditure it does nothing to the loan value

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Looking at saving rates now.

just come across the Santander First Home Saver. A reasonable rate of 5% Gross for a deposit savings regular amounts of between £100 and £300....one catch, you've gotta be under 35!!!

Can I get them on the Age Discrimination Act!!!

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Today I did mortgage application with HSBC I have a 15 percent loan to value - wanted to borrow 35K - I earn 31K no loans not much in the way of outgoings and the max they would lend me is £57,000 I was shocked. Ok for me as only wanted 35 but I now understand why so many 'sold' properties are falling out of bed.

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  • 276 Brexit, House prices and Summer 2020

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