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Nationwide Is To Cap Lending At 4.75 Income

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From Shotoflight on the NI forum

http://www.bbc.co.uk/news/business-28429082

The move, which takes immediate effect, comes as concerns grow about mortgage lending fuelling a house price bubble.

RBS and Lloyds have set a cap of four times income on loans above £500,000.

And the Bank of England's Financial Policy Committee said that mortgage lenders should not have more than 15% of their mortgage lending at income multiples above 4.5 times.

But Nationwide's new restriction applies to all residential lending.

Edited by little fish

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Perhaps someone in NW has worked out how leveraged they are to the UK bubvle housing market? Hoew exposed they are and perhaps how much they own leverage has actually created the bubble.

I think NW will go the same way as NR and Bradford & Bingley.

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Doesn't seem to be too popular :)

http://www.mortgagestrategy.co.uk/news-and-features/sectors/regulation/regulation-news/nationwide-slaps-lti-cap-on-all-resi-lending-and-tightens-stress-tests/2012589.article

" Ashley Brown, director of brokerage Moneysprite, said: "The MMR was introduced so lenders could make sensible lending decisions based on individual circumstances with a built in stress test.

"The BoE has decided that because the London property market is running 'hot' borrowers in all parts of the country should be restrained with an arbitrary multiple. This must be a regressive step and questions why we all bothered with much of the MMR."

http://www.mortgagesolutions.co.uk/mortgage-solutions/news/2356514/brokers-divided-over-nationwides-affordability-restrictions

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Banks like NW lend madly in a housing bubble helping to create the bubble and making it bigger and bigger... then either they stop lending and help bring about the crash or their own leveraged exposure means that they go bust.

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Maybe they'll start with a cap of 4.75, then gradually wind it in a bit.... 3 months time it'll be 4.5, 6 months time it'll be 4.25

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Maybe they'll start with a cap of 4.75, then gradually wind it in a bit.... 3 months time it'll be 4.5, 6 months time it'll be 4.25

And then they will refuse Help to Buy applications and offer savers decent rates.

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Maybe they'll start with a cap of 4.75, then gradually wind it in a bit.... 3 months time it'll be 4.5, 6 months time it'll be 4.25

I think this scenario is quite possible. I also think it possible that the recent BOE regulations could well be just the start in reigning in the market.

Much like the implementation of university fees but in reverse.

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Should be 2.5 times maximum.

However, it is fascinating watching greedy EAs, deluded sellers and moronic buyers who are all still in denial about these new mortgage limits. So many houses in my target area need buyers to be earning 100K.

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Has it just dawned on NW who the mortgage patsy is?

Whoops.

It is interesting, isn't it?

The Lloyds/RBS caps at 4 times income above 500k was always going to be a starting point and give other banks the chance to follow their lead.

There seems to be an obvious trend now in reigning in lending. The measures at the moment may seem tame, but I suspect that these measures will be introduced incrementally as the bankerment attempt to avoid market meltdown.

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Should be 2.5 times maximum.

However, it is fascinating watching greedy EAs, deluded sellers and moronic buyers who are all still in denial about these new mortgage limits. So many houses in my target area need buyers to be earning 100K.

Local wages fit the bell curves pretty well.

Find the local average wage, and watch the number of people earning xxx drop off.

Seriously, once you fer beyond 5 times average - the UK average is 26K so £110K - the number of people who can afford that mortgage tends to be very very small.

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Should be 2.5 times maximum.

However, it is fascinating watching greedy EAs, deluded sellers and moronic buyers who are all still in denial about these new mortgage limits. So many houses in my target area need buyers to be earning 100K.

Yes.

It won't need anything like that to cause prices to fall though.

Other banks will follow these measures now as well I think. Then at some point, perhaps next summer when the election is done and dusted, I can see Lloyds/RBS extending their restrictions.

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I have to say that I agree with the Ashley Brown. The MMR rules are supposed to ensure that a mortgage is affordable, subject to x% increase in mortgage rates. Given the effort banks are expending in assessing an applicant's ability to pay, then salary multiples are an overly simplistic tool and shouldn't be used anymore.

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Ic it applies to joint income its an insanely high multiple (unless of course you are a low ir 'affordability' apologist). If its single highest earner income which applies to a couple too its still v.high, but a step in the right direction.

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And then they will refuse Help to Buy applications and offer savers decent rates.

I'm just intrigued why they would bring in such a high cap

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Should be 2.5 times maximum.

However, it is fascinating watching greedy EAs, deluded sellers and moronic buyers who are all still in denial about these new mortgage limits. So many houses in my target area need buyers to be earning 100K.

Yes. 2.5x main. An heuristic that proved its worth time and again through decades of social change and revolutionary upheavals in employment practises.

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I'm just intrigued why they would bring in such a high cap

Maybe that is where most of their lending already is? It is far far too high, I agree, but then I'm old school and think housing should be affordable on one income. Seems so unrealistic now that I am tempted to do a Winkie and put up Dreamer by Supertramp/ Roger Hodgson :)

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Has it just dawned on NW who the mortgage patsy is?

Whoops.

I thought that a while ago. Their lending into the bubble mania was nonsensical after what happened in 2007.

Nationwide were a well run trusted b.s. as far as im concerned they've thrown their savers to the bankers so they can grow.

Now..i personally can't stand how they are operating.

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Has it dawned on anyone yet...we've not returned to normal..nor will we anytime soon. The interest rates shows us how far from normal we currently are.

I heard a loud thud earlier which i ignored...it wasn't till i read this thread that i realised it was sentiment hitting the floor.

Edited by TheCountOfNowhere

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Has it dawned on anyone yet...we've not returned to normal..nor will we anytime soon. The interest rates shows us how far from normal we currently are.

I heard a loud thud earlier which i ignored...it wasn't till i read this thread that i realised it was sentiment hitting the floor.

Whose sentiment?

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Me too. I hope they crash and burn. Disgusting parasites.

However, I think they have the government on side after they massively upped their (buy-to-let) lending to try and close the gaps created by HBOS and Santander reducing their books.

In fact the government gave them exactly what they wanted - the ability to raise capital over the heads of their members (subject to the faux democracy of a member vote of course)...this allows them to expand their lending even more.

EDIT: If it's 4.75x joint, that's not really even a limit either is it.

In fact, they'll probably just point you in the direction of one of their 'specialist lenders' if you need even more.

There's no IF about it. The CML class income as whatever is on a mortgage application, whether it's single or joint. It's what makes houses look affordable when comparing lending multiples historically. The fact that houses bought on single incomes are now being bought on joint incomes is hidden. It's why families are struggling because any 2nd incomes used to be largely disposable.

This 4.75 isn't a limit, it's a "come and get it" advert, aimed at people who don't realise that the lending taps are back on again.

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I have to say that I agree with the Ashley Brown. The MMR rules are supposed to ensure that a mortgage is affordable, subject to x% increase in mortgage rates. Given the effort banks are expending in assessing an applicant's ability to pay, then salary multiples are an overly simplistic tool and shouldn't be used anymore.

I think the purpose of this is slightly different to MMR. MMR is to ensure that a loan stands a realistic chance of being repaid.

This cap is different. Most people, if they applied for a mortgage of 5x salary would be filtered out by the MMR affordability calculation. A couple on £40k joint would have a substantial amount of income eaten by council tax, essentials, etc.

However, big earners - e.g. someone on £200k, if they claim to be a tight git, will easily be able to afford close to 6x under the MMR calculation, even at stress test interest rates; but equally would be highly vulnerable to any change in circumstances. A cap of 4.75x income is therefore a relatively easy to apply heuristic to filter out these higher risk mortgages.

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