What Multiples Would You Go To?

[music man]

At 34 I'm on a good (not brilliant) wage and I'm saving huge amounts relative to house prices and they are falling as shown by untampered stats. Due to the fact I can't see anyone with a magic wand to turn the manufacturing / retail recession round, or the invention of a cheaper energy source than Gas or Oil which has rocketed I'm waiting.

3.5 is what I'll stretch to for something I wan't to live in.

What about the folks on this site? I'm interested folks?

[Jason]

I would go for 4x, but only because I expect above average wage inflation.

[BandWagon]

From a London perspective, in '89 prices hit 8 times earnings, then fell to 4 times earnings during the crash.

They're currently around 10 times earnings.

I think it's unrealistic for someone living in London to expect to get an average house for 3.5 times, it's too low against historic levels.

I know people who have borrowed 6 times to get on the ladder (from parents,granny,loans etc)

But realistically, I would be prepared to borrow 4 times, plus my STR fund.

That should get me a really decent house in 5 years time, but until then I'm happy to rent.

Edited March 16, 2006 by BandWagon

[OzzMosiz]

I want to go for 3 times max with at least 30% deposit down. I'm hoping to move live with the lady friend therefore share the mortgage until such a time as wanting a family. I assume that the 3 times (on my own) multiple would've shrunk by then allowing a reasonably comfortable life. I want the freedom to sort out a decent pension and also face any future hard times.

[JohnnyLaw]

At 39 my max would be 2x, whilst holding savings / investments of at least 1x.

[mad'un]

I would go to 4x maximum + the majority of my str fund.

I would keep back 6 months mortgage payments just in case poo happens (as it can!).

This is on one wage though.

[music man]

I want to go for 3 times max with at least 30% deposit down.

I go with that, I think it will come. I'm looking at buying below the £120 threshhold and am sure there will be family homes to have at that price in time.

http://www.rightmove.co.uk/viewdetails-107...pa_n=3&tr_t=buy

if something like this isn't selling - on since x-mas I believe then things really aren't that peachy for Norfolk.

Also some reasonable deals are no selling at auction round here either.

So as the crash is underway IMO I'll just wait. It seems that nothing but the best deals are selling. And not in large numbers.

The EA phoned me today asking for me to come in and get a mortgage and I said I was prepared to buy at 3.5 ave salary.

Lets say £20K for Norfolk which gives a total of £70K plus deposit. She did however say she'd got properties at £100K. It seems they are having to proactively work for their money.

I know we can't rush things along but I hope to be with you all when we start buying. A long time away so hello everbody, how are you all today

[Guest Bart of Darkness]

I want to go for 3 times max with at least 30% deposit down.

I'd go for 3.5 with 30% deposit, but that's assuming prices remain roughly as they are today.

[laurejon]

I applaud you all in sticking to the 3.5X1 rule.

I am sure that in a few years when property has crashed finally!! you will all be able to get a lovely 50/50 part housing asscociation house, brand new, in a nice area.

People must be mad to buy now, the writing is on the wall.

[music man]

I am sure that in a few years when property has crashed finally!! you will all be able to get a lovely 50/50 on part housing asscociation house, brand new, in a nice area.

Are you taking the rise laurejon

Contradiction in terms with the when the crash comes and then assuming prices will rise with the 50/50 comment? If not I guess I missed the point - appologies if I have.

Edited March 16, 2006 by music man

[laurejon]

Yes I am pulling your leg.

However its most likely not far from the truth.

Dont forget you can get a house for 200k today with interest rates fixed for 15yrs for 4.5%

In five years time in the worst case scenario houses may drop 50% to 100k

But if rates are 18% then what is the saving?.

So maybe the only option would be a 50/50 property which is what the Government want the people in.

[music man]

That's true but all the same - less debt in the 25 years paying off and will hit a low interest rate at a later stage and one can cash in then.

[laurejon]

Our low interest rates are not the doing of Tony Blair!!!.

You can thank Osama Bin Laden for that one.

Had Sept 11th not happened, you would be in recession today as rates were due to rise in 2000 as inflation had taken off.

I dont think you will find rates below 7% for another century when all this is over.

Edited March 16, 2006 by laurejon

[Guest Bart of Darkness]

Dont forget you can get a house for 200k today with interest rates fixed for 15yrs for 4.5%

Could you post a link to that laurejon, I have a friend who might be interested in that kind of a deal.

Honestly, it is for a friend.

[laurejon]

Try Leeds BS

Leeds Building Society

0870 027 1346 4.69% Mar 2016 6.5% 5.6% APR 80% No Overhang

I read that there was a fixed rate for the life of the mortgage 25yrs for 4.5% in a paper at the Gym but cannot remember the company.

If they are really serious, use an independent broker, you will get a much better deal as they have their nose to the ground 24/7 and they are paid by the Mortgage Society not by you.

I think it was the Mail on Sunday, that and The Sunday Times and you will find similar deals.

Wouldn't it be nice to be able to predict the cost of your mortgage over the next decade? Household expenses are rising fast – you only have to think of gas bills and now council tax payments. A mortgage is often one of the biggest expenses, so a rate fixed over ten years would allow you to budget with certainty, which could be a relief in these uncertain times.

If you like the idea of a 10-year fix, you might also like the current crop of cheap deals. Woolwich recently came out with a rate of 4.67% over ten years. Leeds building society is offering a rate fixed for 10 years at 4.69%, or you can get 4.75% with Newcastle building society.

A fix is always a gamble. If inflation picks up, the Bank of England's monetary policy committee would be forced to raise interest rates. Mervyn King, the governor of the Bank of England, has already admitted that he is puzzled “why long-term rates are at such remarkably low levels.” So you would feel pretty smug if you fixed for ten years at a cheap rate.

But if the base rate fell from the current 4.5% to 3.5%, you might be able to get a two-year fix in 2014 at less than 4%.You might decide that you are prepared to take the gamble. After all, 4.67% is still a pretty good rate even if the base rate falls. And you are buying peace of mind.

John Wriglesworth, a property consultant, says: “You should not really use your mortgage to bet on interest rates. It is more of an insurance policy, so a 10-year fix might be sensible.”

The government would also like us all to take out long-term fixed rates because it believes they would bring greater stability to the housing market. Labour argues that house prices would not move up and down so far or so fast if they were not so directly linked to the movement of interest rates.

Simon Tyler of Chase de Vere Mortgage Management, a broker, says: “In an ideal world it would make perfect sense for everybody to take out cheap, long-term fixes, securing affordable finance for their homes and removing the need to remortgage so often. And there's no doubt that the latest batch of 10-year fixes is fantastic value.”

So, why aren't we all rushing to lock into a cheap fixed rate for the next decade? The big problem with long-term fixes is the hefty early repayment charges.

Woolwich charges 4% of the outstanding mortgage amount if you want to switch or pay off the loan within the ten years. So, if you have a £250,000 mortgage, you would have to pay a penalty of £10,000.

Other lenders stagger the early repayment charges. Leeds , for example, charges 6% in the first two years, falling to 2% in the final year.

Tyler says! : “If you get divorced, are made redundant, or decide to sell your home and move to a smaller property, then you will be hit with an early repayment charge. The penalty could easily wipe out any savings you have made on the home loan, so your cheap long-term fix could backfire.”

You might also have a problem if you want to trade up the housing ladder. You can usually take your mortgage with you when you move home, but if you want to borrow extra money you will have to take out a new mortgage with your existing lender. Tyler says: “Who knows what rate will be on offer at the time? Worse, you might find that your lender no longer considers you a suitable applicant, effectively forcing you out of the deal and triggering the early repayment charge.”

Longer fixes of 15, 20 or even 25 years usually come with a window that allows you to escape penalty free, say in the fifth year. But they are often more expensive. Cheshire building society, for instance, offers a fix until 2020 at 4.99% but will let you escape without penalty in April 2011, 2012 and 2013, so you need only be tied in for five years.

Many people prefer the greater flexibility of a short-term fix of say two or five years. You are then free to switch or pay off the loan after the fix runs out.

David Hollingworth of L&C Mortgages says: “The rates on 10-year fixes at the moment are really quite low and only a little higher than a five-year fix. The current best five-year deals are just below 4.60%. But most borrowers just don't like locking in for that long and will often opt for the cheaper rates available on shorter term deals.”

Portman is offering a rate of 4.30% on a two-year fix. Yorkshire building society is not far behind at 4.38%. If you had a £100,000 mortgage and took out the Portman deal your monthly payments over 25 years would be £545, compared with £565 with the Woolwich 10-year fix. There's not much in it - if you're sure you won't want to switch any time soon.

[music man]

They clearly need to keep prices high and will do as much as they can to endebt the people in a falling market.

These deals do look good though. In the U.S. they were promoting them and before their recent housing / finace (FED) news got a lot of people traped in.

People could have done the same but bought cheaper if they waited, it is happening here.

Just wait the companies are on the ropes by offering these deals.

[stillill]

5x with a 30% deposit I guess, I live in London and earn above average but would obviously prefer less (remember 3.5 with a 5% deposit?). It'll come round again but I won't be able to wait it out.

[Down with the BBC]

500MILLION. According to the EA's i will need to by 2020 if i dont buy now!

[music man]

I not easily marketed to that's my problem - the debt (insert ridiculous price of house here) is important to me. No 25 yr fixed rate can accomodate all the posibilities you mention.

No guarentee and as I said in a previous thread if you save for a few years the £1.80 you pay back on the £1 for having a mortgage is greatly reduced. So saving in a dropping market regardless of interests rates is always a good thing. Raised interest rates are a double edged sword with regard to the FTB.

With them comes huge house price reductions, yet increased mortgage payments.

If you can save I think it's worth the wait, and late 2007 hits a good spot for me. There is a need to go now but there is also a need to wait for the stupid prices to adjust.

Down with - is that computer language from my school days.

10 music man

20 goto 10

30 run

kinda type thing.

Edited March 17, 2006 by music man

[Guest Bart of Darkness]

hanks for the very detailed info laurejon.

I'm thinking that it might be useful for a married couple I know who are coming to the end of their initial introductory rate and want the security of a fixed rate.

[laurejon]

Its rather telling that the head of the bank of england cannot explain why banks are lending at such cheap fixed rate deals for 20yrs

I think it might be the case that many people will kick themselves when the rates rise!!!.

Ideally you would have bought in 1995, and fixed your rate today for 20yrs that way you would have a house with a 40K mortgage fixed for 20yrs and worth around 250k today.

Oh for hindsight

[music man]

What do you think for FTB's Bart?

Wait for the reductions as they haven't been trapped by the VI's yet is my oppinion.

[FTB oneday]

My income is about 35k with a 10% deposit I would limit to 3.5x my wages.

But only when i feel that i would be getting the right house at a fair price.

Got a while to wait yet, Still can't rush these things

[music man]

As for me, and I'll keep to the 3.5 times salary 'of the average joe' in the area to know when pricing reality comes home.

I'm glad your up there on the salary thing FTB one day. It does help.

I hope you don't live in London - sorry but it's not quite the same as Norfolk or anywhere else in the U.K.

[Guest muttley]

Its rather telling that the head of the bank of england cannot explain why banks are lending at such cheap fixed rate deals for 20yrs

Maybe they expect deflation and falling interest rates. 20yr fixed rate doesn't look so clever then.