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Come On Down

4 X Salary Mortgage = 20% Take Home?

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http://www.bankofengland.co.uk/publication...5/speech255.pdf

A quote from Stephen Nickells recent speech:

"If inflation is 2% and nominal interest rates are 5%, an individual borrowing four times their annual salary

will only be paying 20% of it in mortgage payments in the first year. Perfectly possible."

Now, I've done some calculations and over a 25 year mortgage at 5%, 4 times my salary is roughly 40%

of my take home pay. I think he maybe excluding TAX and NI which is massively misleading I'd say??

Edited by Come On Down

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Guest wrongmove

http://www.bankofengland.co.uk/publication...5/speech255.pdf

A quote from Stephen Nickells recent speech:

"If inflation is 2% and nominal interest rates are 5%, an individual borrowing four times their annual salary

will only be paying 20% of it in mortgage payments in the first year."

Now, I've done some calculations and over a 25 year mortgage at 5%, 4 times my salary is roughly 40%

of my take home pay. I think he maybe excluding TAX and NI which is massively misleading I'd say??

He is obviously talking about gross pay, and about Interest Only mortgages:

salary multiple x interest rate

4 X 5% = 20% :)

Percentage of net pay on a repayment mortgage would be towards double that number, as you point out.

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http://www.bankofengland.co.uk/publication...5/speech255.pdf

A quote from Stephen Nickells recent speech:

"If inflation is 2% and nominal interest rates are 5%, an individual borrowing four times their annual salary

will only be paying 20% of it in mortgage payments in the first year."

Now, I've done some calculations and over a 25 year mortgage at 5%, 4 times my salary is roughly 40%

of my take home pay. I think he maybe excluding TAX and NI which is massively misleading I'd say??

I think he make be doing calculations for an Interest Only mortgage

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http://www.bankofengland.co.uk/publication...5/speech255.pdf

A quote from Stephen Nickells recent speech:

"If inflation is 2% and nominal interest rates are 5%, an individual borrowing four times their annual salary

will only be paying 20% of it in mortgage payments in the first year."

Now, I've done some calculations and over a 25 year mortgage at 5%, 4 times my salary is roughly 40%

of my take home pay. I think he maybe excluding TAX and NI which is massively misleading I'd say??

and on an average salary about 27.5% goes in tax and NI so the payments in the above example that account for 20% of takehome pay or nearly 30% of gross pay ................

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I think he make be doing calculations for an Interest Only mortgage

Ahh ok. But, he's still spinning the point that is 20% period. Forgetting it needs to be repaid at some point.

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bring on 0% morgages...

'everyone can afford any property they want on any salary multiple, and as long as houseprices always go up, you can withdraw as much equity from your house as you want'

The closer you get to 0% interest rates, the closer this is to the truth, there is no incentive to pay off the capital....

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http://www.bankofengland.co.uk/publication...5/speech255.pdf

A quote from Stephen Nickells recent speech:

"If inflation is 2% and nominal interest rates are 5%, an individual borrowing four times their annual salary

will only be paying 20% of it in mortgage payments in the first year."

Now, I've done some calculations and over a 25 year mortgage at 5%, 4 times my salary is roughly 40%

of my take home pay. I think he maybe excluding TAX and NI which is massively misleading I'd say??

He is definately looking at gross salary, there are a couple of further points to note:

1. Interest rates are not 5%, they are closer to 6%.

2. It is only 20% on an interest only mortgage, a repayment mortgage would be higher, much higher if you wanted to repay it quickly enough to move up the ladder.

3. 20% of the gross is 30% of the net salary (again interest only).

4. 4 x salary would buy most people absolutely F*** all!

:angry: :angry: :angry: :angry: :angry:

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I think he make be doing calculations for an Interest Only mortgage

Just run £25k salary figures through Charcol morgage calculator [hope they dont add this to this months stats showing surge of buyer interest :huh:

£100k mortgage [not that you'd get much with that] has monthly repayments at £415 IO / £585 repayment. £25k approx £2080 gross/£1550 net

it looks like the 20% is on an IO morgtgage and 20% before tax/NI earnings

Real-world [% of after-tax earnings on a repayment mortgage - what? youre supposed to pay the money back?] figures are 38% on monthly mortgage repayments

20% - it's and economic miracle! :lol:

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He is definately looking at gross salary, there are a couple of further points to note:

1. Interest rates are not 5%, they are closer to 6%.

2. It is only 20% on an interest only mortgage, a repayment mortgage would be higher, much higher if you wanted to repay it quickly enough to move up the ladder.

3. 20% of the gross is 30% of the net salary (again interest only).

4. 4 x salary would buy most people absolutely F*** all!

:angry: :angry: :angry: :angry: :angry:

Exactly. He's a spin merchant through and through and obviously has lots of shares in the Halifax etc.!!!

Gordon Brown's puppet was mentioned on other posts.

The bit that did it for me was the "perfectly possible" sentence afterwards!

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He is obviously talking about gross pay, and about Interest Only mortgages:

salary multiple x interest rate

4 X 5% = 20% :)

Percentage of net pay on a repayment mortgage would be towards double that number, as you point out.

Welcome to the new paradigm.

We're now living in an environment of creative accounting, where you don't actually work out what it costs to repay a loan in the real world, just what it would theoretically cost if you take out tax, and don't actually pay back the capital - it has Brave New Labour spin all over it.

House prices can remain permanently high in this environment, an entire generation can be enslaved to debt though interest only mortages, or priced out of a home forever.

How did it come to this? :(

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Exactly. He's a spin merchant through and through and obviously has lots of shares in the Halifax etc.!!!

Gordon Brown's puppet was mentioned on other posts.

The bit that did it for me was the "perfectly possible" sentence afterwards!

Quite. He has taken the most optomistic view possible then used it to say everything is fine, well lets turn this around to show that everything is far from fine, everything is F***ed:

£30,000 salary (approx £21,500 net), £120,000 mortgage (just enough to buy a 1 bed flat with 10% deposit) repaid over 25 years @ 6% = £782 pcm or 44% of net - just about affordable.

But, lets say that I actually want to build up enough equity to be able to move onto the second step in a few years. Lets see what happens if I try to repay the loan over shorter periods:

Over 20 years = £872 pcm or 49% of net.

Over 15 years = £1,030 pcm or 57% of net

Over 10 years = £1,359 pcm or 76% of net.

Think i'm being a bit too conservative with my figures (I am, but not by as much as you might think)? Remember that with the average family home now costing over £200,000 you will need to pay off almost all of that mortgage before you can trade up. So for the average 34 year old FTB, to have any chance of owning a family property before its to too late (mid 40's and that's pushing it!) you really do have to pay the loan off over a 10-15 year timespan.

As i've said before, buying at today's prices is a life sentance.

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Is there anyway we can report this idiot?

Isn't he the toss pot who voted for a 0.25 percentage point decrease this month? :angry:

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House prices can remain permanently high in this environment, an entire generation can be enslaved to debt though interest only mortages, or priced out of a home forever.

How did it come to this? :(

It came to this because the government and Bank Of England think-tanks came to the (perhaps startling) realisation that the money people earn now and in the future won't actually be needed by, say, clothes shops, shoe shops, DIY stores, travel agents, my local mountain bike shop, newsagents, pubs, coffee houses, restaurants, charities, one-man-band tradesmen offering services to the public, the entertainment sector, sports clubs, cinemas you name it...

Because they can all just do it for free.

:P

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  • 301 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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