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House Price Multiples (yet Again)


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Seeing as that troll-t*sser BBB seems to have vanished up his own blowhole (mummy called him in for tea? Been sacked from his junior Estate Agent job? Running around frantically trying to find cash to stop his little Lego empire being repossessed??? who cares..) I thought I'd take up the Bullsh!tter challenge on his ugly little behalf:-

The stat "3.5 x Income" seems to keep on cropping up.

I'm guessing this is 3.5 time a single 'average' salary.

Average salary nationwide is supposed to be 25k-ish - so that's 75k plus another 5? 10? as a deposit? I.e. somewhere between 80 and 90k is a 'realistic' average price?

So... how come in London, virtually everyone buys with a partner. And when they buy, they are both working. So... shouldn't it be 3.5 x TWO average salaries???

I.e. 3.5 x 50k = 150,000 plus... say 30 k deposit?

I.e. average house price now is right on the money??

Or am I missing something...???

(sorry for all the question marks)

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The stat "3.5 x Income" seems to keep on cropping up.

I'm guessing this is 3.5 time a single 'average' salary.

Average salary nationwide is supposed to be 25k-ish - so that's 75k plus another 5? 10? as a deposit? I.e. somewhere between 80 and 90k is a 'realistic' average price?

So... how come in London, virtually everyone buys with a partner. And when they buy, they are both working. So... shouldn't it  be 3.5 x TWO average salaries???

I.e. 3.5 x 50k = 150,000 plus... say 30 k deposit?

I.e. average house price now is right on the money??

Or am I missing something...???

(sorry for all the question marks)

The calculation for a couple has always been 3 times joint income, not 3.5, I think I'm right in saying.

Not that it has meant a toss in the last few years, with lenders bending over backwards to lend 6 or 7 times incomes. Not so easy to pull of now, though - be very interested to see the fuigures for mortage approvals next Spring... ;)

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in London, virtually everyone buys with a partner

Hmm, wouldn't be so sure about that. More like ONLY couples where both partners are working can AFFORD to buy in london.

shouldn't it be 3.5 x TWO average salaries???

No, becuase unless you're doing a lie-to-buy, the lenders will only lend you 3x one income and 1x the other or something like that.

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Sorry, didnt make myself clear -

everyone always quotes "3.5 x Avg salary" to highlight how out of whack prices are right now, but shouldnt it be 3.5 x 2 salaries? Or 3 x 2 sxals? Seeing as single buyers are pretty rare?

Can someone confirm that the average actually is 3.5 x ONLY ONE AVERAGE salary?

i.e 1.75 x TWO average sals?! :-)

(just thought I'd throw some 'bbb' type CaPS in thEre)

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I have been told that standard borrowing is 3.5 times the principle earner and one times the spouse.

The reason is because the partner is expected to have children.

If you are same sex, or adamant that you are not having children then they will accept 3 times each salary

So two earners on 25k would be able to raise 150k easily.

Obviously because IR's are so low the ratio's are a general rule of thumb.

Its your responsibility not to overextend, and thats the way it should be everyone is different.

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Mmmm. Sounds like no one knows for sure. I do seem to remember that in 'the olden days' (pre-2000) they would loan 3 x 1 + 1 x 'tother.

right now that would suggest a 'fair' price for yer avg 'hice' would be :-

3 x 25 + 1 x 25 i.e. 4 x 25 plus a deposit.

4 x 25 = 100. If the depo was in the region of what? 10k? 20k? maybe that gives a clearer idea of where the mid term 'support' for the market might be... 120k? i.e. a 40k fall. that's a 25% decline, aint it?

If its 2.5 x joint, thats 75K plus depo - i.e. MILES to fall...

whatever. no fun being a bull (sh!tter).

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I have just dug out the mortgage details we went through with Britannia 5 years ago and this is what their official stuff says:

3x higher salary + 1x lower salary

OR

2.5x joint salary

In answer to one of our "questions" we were told we could get 2.75x joint.

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You people need a professional.. *ahem*

Some lenders lend more than others. Also, the better your credit score the higher the multiple.

Some examples...

Northern Rock

High Credit Score

Joint applicants earning combined income of £32,501 +

Multiple = 3.4 x joint income

Single applicant earning over £32,501 - high credit score

Multiple = 4.6 x income

Single applicant earning over £100K - same high credit score

Multiple = 4.9 x income

Northern Rock lend more than other lenders. Check out their website for loads of numbers like this...

http://www.northernrock.co.uk/intermediaries/policyInfo.asp

(Ignore together, unless you want 100%+ at loan shark rates)

No passwords required.

Voila.

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The problem is that with this want want world we live in the youngsters are not prepared to save for a deposit.

If they put aside 150k over say three years whilst paying off their student loans they would find getting onto the housing ladder a hell of a lot easier.

As we know, New Labour recommend that everyone saves at least 20% of their net salary for a rainy day. I cant see what peoples problem is.

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You people need a professional.. *ahem*

Some lenders lend more than others. Also, the better your credit score the higher the multiple.

Some examples...

Northern Rock

High Credit Score

Joint applicants earning combined income of £32,501 +

Multiple = 3.4 x joint income

Single applicant earning over £32,501 - high credit score

Multiple = 4.6 x income

Single applicant earning over £100K - same high credit score

Multiple = 4.9 x income

Northern Rock lend more than other lenders. Check out their website for loads of numbers like this...

http://www.northernrock.co.uk/intermediaries/policyInfo.asp

(Ignore together, unless you want 100%+ at loan shark rates)

No passwords required.

Voila.

This is now, what RMF was asking was what did is USED to be traditionally on AVERAGE. We all know the Northern Rock are the biggest criminals out, going for those ultra low headline grabbing interest rates, only to sting the unwary with higher interest rates about 3 months in!

I wouldn't want to have any savings stashed away in Northern rock right now...if anyone goes to the wall, it'll be these guys I reckon!

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The problem is that with this want want world we live in the youngsters are not prepared to save for a deposit.

If they put aside 150k over say three years whilst paying off their student loans they would find getting onto the housing ladder a hell of a lot easier.

As we know, New Labour recommend that everyone saves at least 20% of their net salary for a rainy day. I cant see what peoples problem is.

Was just about to ask how the F*&k they would do that but just realised you are taking the p*ss.

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The calculations are for the ideal set up. No one goes with it. Recently I checked with Royal Bank of Scotland. They agreed to give me five times my salary as mortgage if I stayed with them for five years. No wonder house prices had been so high. It won`t be anymore.

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The problem is that with this want want world we live in the youngsters are not prepared to save for a deposit.

If they put aside 150k over say three years whilst paying off their student loans they would find getting onto the housing ladder a hell of a lot easier.

As we know, New Labour recommend that everyone saves at least 20% of their net salary for a rainy day. I cant see what peoples problem is.

Was just about to ask how the F*&k they would do that but just realised you are taking the p*ss.

Or at least I HOPE he was taking the piss..... :huh:

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Traditional lenders used to lend either:

3.5x to 3.75x Single Salary

OR

2.5x to 3.75x First salary + 1.5x to 2.5x second salary.

Almost no lender will allow you to borrow 3.5x JOINT income.

Try HSBC's mortgage calculator for examples of this at: http://www.ukpersonal.hsbc.co.uk/hsbc/pers...and-home-buying

EXAMPLE 1:

Single Income of £10,000 = Mortgage of £37,500 (3.75x)

EXAMPLE 2

Income 1 of £10,000 and Income 2 of £10,000 = Mortgage of £60,000 (not the £75,000 that you would be allowed to borrow if you could simply add the two salaries together).

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Guest Charlie The Tramp

In 1970 you had more chance being struck by lightning twice in the same place, than getting a joint mortgage. :(

3x the single earnings for the top earner and that was your lot, plus they required a reference, and you were then given a time when the mortgage would be available for your purchase.

Intended joint ownership of the property made no difference.

Probably kepted HPI in check, allowing FTBs to get on the ladder with ease.

All my friends and a large number of workmates on average, and below average earnings bought their first home in their mid twenties. Those who declined said they did not want a 25 year debt around their necks.

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Yep, traditional multiple is 3.5 times single. Although there are variations on this as described above.

In 1987 the Anglia BS was the only one who would lend me more than 3 times my salary! Limits were chucked out the window the following year once prices rose so normal multiples were not enough. Later on the abandonment of traditional lending limits was held up as evidence that things had gone mad and that was why it all crashed. The abandonment of traditional lending limits this time around was a key indicator that it was going to go bad.

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The problem is that with this want want world we live in the youngsters are not prepared to save for a deposit.

If they put aside 150k over say three years whilst paying off their student loans they would find getting onto the housing ladder a hell of a lot easier.

As we know, New Labour recommend that everyone saves at least 20% of their net salary for a rainy day. I cant see what peoples problem is.

<{POST_SNAPBACK}>

Tsk. Spendthrift. You forgot that we are also supposed to be putting 30% away in a high yielding stakeholder pension...

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Guest Retired Pensioner
In 1970 you had more chance being struck by lightning twice in the same place, than getting a joint mortgage. :(

3x the single earnings for the top earner and that was your lot, plus they required a reference, and you were then given a time when the mortgage would be available for your purchase.

Also required a 10 to 15% deposit, pay their solicitors fees £180, survey fee £80 and it was private to the BS, and that other little extra the one off indemnity insurance of £360 for up to 4k all up front. Made you save like hell. :(

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  • 442 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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