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Researching Credit Slackening

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I'm currently researching the slide into higher and higher mortgage multiples can anyone who's looked into mortgages recently point me at who is offering more than 3.5 for single people and 2.5 for couples.

Would also be grateful for any links or insights into how credit deregulation history and how it affected the mortgage market...

Also I came across this article on the FSA site from 2000, looked at in today's context it's very scary;

London house price premium and income multiples both at historic highs, FSA warns mortgage lenders

FSA/PN/150/2000

04/12/2000

London house prices have reached a historically high premium over prices in the rest of the country, Howard Davies, Chairman of the Financial Services Authority, warned today at a Council of Mortgage Lenders conference. At the same time, average income multiples were now at or above the level at the height of the last housing boom in the third quarter of 1989.

It is striking that the gap between average London house prices and average prices in the rest of the country is now as large in percentage terms a it was in its peak in the late 1980s. On the Halifax index, the ratio of London to average house prices peaked at 1.75 at the beginning of 1988 and was again at that level in the third quarter of this year, having fallen to 1.22 in 1993.

I am not in the prediction business, and it may be that the London premium will remain at this historically high level, or that house prices elsewhere in the country will trend upwards more quickly. But clearly one cannot exclude the possibility of a fall in London house prices, which could put very high loan-to-value loans into the danger zone.

Given the level of house prices, it was particularly important for lenders to consider whether the people they lend to can afford to service and repay those loans, and for borrowers themselves to be clear-sighted about their own ability to meet this commitment. There had been a continued upward trend during 2000 in average income multiples (the number of times a borrowers income that a lender will provide as a mortgage). So lenders still needed to take more account of potential affordability problems for borrowers.

One particularly worrying trend is the continuing rise in loans at high income multiples, by which I mean above 3 for a single person or 2 for joint borrowers. The proportion of loans in this category has increased sharply, and has represented as much as a third of new lending in recent quarters, Howard Davies said.

You will all be aware that the Government have recently begun to take an interest in the whole issue of over-indebtedness and responsible lending, through the DTIs Debt Taskforce. That reinforces the need, we think, for lenders to monitor their trend in lending by income multiple. And we have been surprised to find that not all lenders do so as a matter of course.

As I pointed out earlier this year, while higher income multiples are perhaps manageable at low long-term interest rates, unsecured borrowing commitments by the same borrowers have also been rising.

There were, on the other hand, signs that lenders had responded to the FSAs warning over credit standards. Loan-to-value ratios (the ratio of loans to the current market valuation of the properties securing the loan) had moved down, with the proportion of loans exceeding 75% of house price valuation having fallen back quite markedly.

...

http://www.fsa.gov.uk/Pages/Library/Commun.../2000/150.shtml

Edited by DoubleBubbleTrouble

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Lending people 6 times their salary now ,especiallyif on a 10 year fixed rate is no more irresponsible than lending someone 3 times their salary in 1989..........as Irs were double what they are now even allowing for the effect of MIRAS which knocked nearly a third off interest payments back then

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The Halifax web site told me that I could borrow a figure between X and Y where X was about 4.2 times salary and Y was 5 times salary.

http://www.halifax.co.uk/mortgages/afforda...alculator.shtml

I was in a bank for other reasons and asked about salary multiples. They say that it depended on other factors, but 4.2 was about what they went to.

Billy Shears

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Lending people 6 times their salary now ,especiallyif on a 10 year fixed rate is no more irresponsible than lending someone 3 times their salary in 1989..........as Irs were double what they are now even allowing for the effect of MIRAS which knocked nearly a third off interest payments back then

Difference is, increasing IRs at 2% on a 15% mortgage back then wasn't much of a rise.

but 2% on an inflated property price at 4% is 50% more!

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alliance and leciester..... you should be able to get between 4 and 6 times your salary, plus any deposit you might have. I am offered 5.9x my salary (exlcuding my bonus). Interestingly the bigger your deposit the amount you can borrow goes up rapidly...

http://www.alliance-leicester.co.uk/mortga...ortgagesellmenu

I talked to Barkleys at the weekend, was offered 4x, but they said they could be more flexable...

Edited by moosetea

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Alliance and Leicester seemed very flexible.

Once we'd divulged our combined salary + bonus they didn't seem to have a ceiling at all.

Advisors were gutted when we borrowed less than 1 yrs combined salary / bonus.

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4.2 times the ave salary where i live comes to less than £100k....and the ave house is £225k......

cheapest one bed flat is about £100k......and the median salary must be less than the mean average due to salary distribution being skewed.....

Difference is, increasing IRs at 2% on a 15% mortgage back then wasn't much of a rise.

but 2% on an inflated property price at 4% is 50% more!

but since 2002 people have had the option of long term fixes at more or less current rates......

Throughout the 70s and 80s and 90s IRs were so volatile that long term fixes were very expensive...

Before the 70s IRs and house prices were consistently low but lending on houses and indeed all other things was effectively rationed.......which kept a lid on prices.

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With house prices *always* going up the building societies don't care, the worst comes to the worst they reposses the house and sell it for more than it cost and everyone is happy :)

I actually have a friend who works in resposseions and dealing with debts. He is the lawyer guy the banks sent to the court when people can't pay their debt and need a judgement against them. Right now he says its all fairly easy when it comes to houses, the banks don't care if it takes a while to get the house because the house is still valuable and almost no one is in negative equity. He knows that when negative equity starts happening the thing while change and it will an absolute mess in these cases. He dosen't plan on still doing the job when that happens.

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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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