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davep24

Mortgage Multiples

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i read in another topic that the next few months 1.3 millions mortgages are coming out of their discount period, i guessing that alot of these mortgages were taken out with large (4 and 5x) salary mortgages. What happens when these people apply for a new mortgage and the bank can't/won't offer another discounted mortgage at the same mulitples??

will these people be stuck in thier original mortgage or am i being stupid??

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They only won't be able to remortgage if they are in negative equity in which case they are screwed unless their wages have gone up significantly.

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They only won't be able to remortgage if they are in negative equity in which case they are screwed unless their wages have gone up significantly.

It is very unlikely after two years they will be in negative equity - it will be the multiples that may screw them.

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It is very unlikely after two years they will be in negative equity - it will be the multiples that may screw them.

Disagree. Rates haven't gone up enough to hurt people that much. Even if people manage to fix at 4% they are sill only going up <2% . Mortgage multiples of 5 x salary are affordable with rates < 8% or so.

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Disagree. Rates haven't gone up enough to hurt people that much. Even if people manage to fix at 4% they are sill only going up <2% . Mortgage multiples of 5 x salary are affordable with rates < 8% or so.

Its not necessarily "affordability" its more "availability" I wonder how many of these have been self cert that now need to prove income as well.

on an interest only basis from 4% to 5.5% is a 37.5% increase. 4.5% to 5.5% is still a 22% increase.

This will be a problem for some people.

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Its not necessarily "affordability" its more "availability" I wonder how many of these have been self cert that now need to prove income as well.

on an interest only basis from 4% to 5.5% is a 37.5% increase. 4.5% to 5.5% is still a 22% increase.

This will be a problem for some people.

If they are self cert their mortage company will let them remortgage or else they will have to face up to the embarassment of their extremely stupid lending.

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Its not necessarily "affordability" its more "availability" I wonder how many of these have been self cert that now need to prove income as well.

on an interest only basis from 4% to 5.5% is a 37.5% increase. 4.5% to 5.5% is still a 22% increase.

This will be a problem for some people.

BANG ON minesapint.

That's the one - "can you NOW PROVE YOUR INCOME YOU TOLD US 2 YEARS AGO ON GOOD FAITH?"

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BANG ON minesapint.

That's the one - "can you NOW PROVE YOUR INCOME YOU TOLD US 2 YEARS AGO ON GOOD FAITH?"

it is the mortgage company that will be seen to be at fault if they do this which is why i think they will try to save face.

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it is the mortgage company that will be seen to be at fault if they do this which is why i think they will try to save face.

That would be valid if the mortgage company can afford to borrow credit to continue to finance these deals. The short of it is they can't and so all these wonderful deals people were able to get in the last few years just cannot be financed anymore.

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It's funny isn't it - who will complain first the applicants who lied about their salary and committed mortgage fraud or the lenders who broke most of the rgulator's rules post 2005 and did not treat their customers fairly by checking their incomes

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-If you do not have the evidence to support your income.

- You have missed payments.

- You do not have sufficient LTV or are in negitive equity.

How can you now re-mortgage for the best deal? Basicly you are stuck.

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i read in another topic that the next few months 1.3 millions mortgages are coming out of their discount period, i guessing that alot of these mortgages were taken out with large (4 and 5x) salary mortgages.

Two mates of mine both bought at a similar time two years ago, are in exactly this position now. Both stretched themselves to the limit in terms of what they could afford, and one did no-doc (lied about income). Oh did I mention that they are both IO?

Am I sympathetic? No, but I'm worried about them cos they're me mates. I tried my best to talk them out of it. They are screwed I'm afraid. If they're very lucky they'll be able to keep their homes in exchange for a lifetime of debt slavery, and I mean a lifetime.

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Good points

But lets work with real figures on a couple buying . or (single)

Mortgage £300K interest only.

fixed 4.5% £1125 per month

variable rate 7% £1750 per month

variable rate 7.25% £1812.5 per month

variable rate 7.75% £1937.5 per month

Vulnerable people £50 -£60 K single or joint income. £3.2 K net or less,

car loan and running costs £350 per month, Food £500 (£250) per month, £5K loan over 5 years £130. Travel £200 (100), clothes £200 (£100), Council tax £180 (120), electric/gas £60, insurance life household £60

Total out goings £3617.50 (£3107) on 7.75% interest only variable.

£200K

fixed rate 4.5% £900 per month

variable rate 7% £1166 per month

variable rate 7.25% £1208 per month

variable rate 7.75% £1291.66 per month

Vulnerable people £40-£50 K single or joint income. £2.8 K net or less,

car loan and running costs £350 per month, Food £500 (£250) per month, £5K loan over 5 years £130. Travel £200 (100), clothes £200 (£100), Council tax £120 (80), electric/gas £60, insurance life household £60

Total out goings £2971 (2,460) on 7.75% interest only variable.

Now for those that lied there is a built in psychology that means they would lie for that bit extra as well . say 10% so that 20K or 30K would have also subsidised the payments over the two year fixed. Taken on the premise that they would do home improvements.

Of course they have been kidiing themselves. Often the ones that can lie on an application form lie to themselves.

I reckon that we will see repossessions from March next year on a unprecendented scale. Think 250,000 per annum.

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If they are self cert their mortage company will let them remortgage or else they will have to face up to the embarassment of their extremely stupid lending.

Really? I think they will be rubbing their hands in glee

Discount period expired? No one will lend you 6x salary? Thats a shame. Guess you will have to stick with the mortgage you have - oh it jumps to 2% above bank base rate? Shame... oh you mean we will be taking twice as much interest from you for the rest of your life? What a pity.

We'd love to help, but our hands are tied...

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the best deals ive seen are 5.5%

The funny thing is these are either 60% LTV or 80% LTV.

I guess most will struggle, but imagine the folks now are more, 6-7x mortgage, with still 90% LTV... they have no hope of remortgage if thats the case, and a very good reason to make sure when you buy you have either sensible multiples, a repayment vehicle and a decent deposit.

If you satisfied those 3 requirements I assume your classified as PRIME, and will have no problems remortgaging.

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Really? I think they will be rubbing their hands in glee

Discount period expired? No one will lend you 6x salary? Thats a shame. Guess you will have to stick with the mortgage you have - oh it jumps to 2% above bank base rate? Shame... oh you mean we will be taking twice as much interest from you for the rest of your life? What a pity.

We'd love to help, but our hands are tied...

Exactly.

For BTLers and those in new-build trying to remortgage I think it is very likely that valuations will be lower as well, so anyone who took a 15% cashback from a developer could easily find they are in neg. equity. I doubt there will be many lenders interested in them at all, or at best only at a rate higher than the SVR they're going to switch to with their current lender. People are just going to have to pay more or sell up.

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Yes, that's right. The bankers are going to be loving the fact that more people will be defaulting and turning them into another NR.

Think before you type.

I think you should take heed of your own advice.

Say a bank has a mortgage book of 5,000 loans each at an average of GBP200,000. This gives a total book of GBP1,000,000,000. If interest rates were to rise by 200bps on this book due to resets that would generate additional annual gross income of GBP20,000,000. Thus of the original book of 5,000 loans 2% would have to default with the bank not able to recover a single penny for the banks to suffer a loss. If on a reaonable basis the banks were able to recover only 50% of the debt then the default rate jumps to 4% before a loss is incurred. If banks were to recover 75% then 8% of the loans would need to go bad.

Besides NR has not got in to trouble beacuse of defaults on its loan book per say it is beacuse it can not get funing for the book.

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Disagree. Rates haven't gone up enough to hurt people that much. Even if people manage to fix at 4% they are sill only going up <2% . Mortgage multiples of 5 x salary are affordable with rates < 8% or so.

Generally maybe. But that depends on how affordable it was in the first place. For many, it wasn't.

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Good points

But lets work with real figures on a couple buying . or (single)

Mortgage £300K interest only.

fixed 4.5% £1125 per month

variable rate 7% £1750 per month

variable rate 7.25% £1812.5 per month

variable rate 7.75% £1937.5 per month

Vulnerable people £50 -£60 K single or joint income. £3.2 K net or less,

car loan and running costs £350 per month, Food £500 (£250) per month, £5K loan over 5 years £130. Travel £200 (100), clothes £200 (£100), Council tax £180 (120), electric/gas £60, insurance life household £60

Total out goings £3617.50 (£3107) on 7.75% interest only variable.

£200K

fixed rate 4.5% £900 per month

variable rate 7% £1166 per month

variable rate 7.25% £1208 per month

variable rate 7.75% £1291.66 per month

Vulnerable people £40-£50 K single or joint income. £2.8 K net or less,

car loan and running costs £350 per month, Food £500 (£250) per month, £5K loan over 5 years £130. Travel £200 (100), clothes £200 (£100), Council tax £120 (80), electric/gas £60, insurance life household £60

Total out goings £2971 (2,460) on 7.75% interest only variable.

Now for those that lied there is a built in psychology that means they would lie for that bit extra as well . say 10% so that 20K or 30K would have also subsidised the payments over the two year fixed. Taken on the premise that they would do home improvements.

Of course they have been kidiing themselves. Often the ones that can lie on an application form lie to themselves.

I reckon that we will see repossessions from March next year on a unprecendented scale. Think 250,000 per annum.

Yeah but...I expect to see people drasticly reduce their spending on food, (especially eating out)

clothes ,(we all have too many anyway) travel , (a real luxury) cars,(a 1k car is enough for

most purposes)etc. in order to keep their houses. Obviously if this happens the 'real'

economy will be impacted and we will see large increases in unemployment,government

borrowing along with reduced tax revenue.Those watching events over the past three months

should have already adjusted their spending habits .

250,000 repossessions per annum? Sadly you may be right.

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