Wednesday, Jun 14, 2006

Home buyers stretch finances to record levels in order to take on new mortgages

BBC: Home buyers stretch cash limits

Believe it or not the title of this entry in the blog was the output of a survey. Was a survey really required to state what most children would understand. According to the BBC, Director General for the Council of Mortgage lenders (CML) Michael Coogan played down worries that borrowers were becoming overstretched.
Is Michael Coogan the brother of Steve?

Posted by denzil @ 02:59 PM (683 views)
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1. Paul said...

The last few lines sound like a barely disguised attempt at panicking fence sitters into buying:

"It suggested that this was a result of borrowers being keen to lock themselves in to attractive deals at low rates of interest, thus protecting themselves if interest rates move higher in the short term."

Meanwhile the BBC announces upward pressure on interest rates.

Wednesday, June 14, 2006 05:07PM Report Comment

2. uncle tom said...

"Traditionally, lenders have tried to restrict their lending to three times a single person's income or 2.5 times the combined earnings of a couple"

Err... traditionally it was 2.5 times first income plus the second income (x1) if there was one.

Any higher multiple is asking for trouble - forget the arguments about percentage of income, in the past new home owners wore a hair shirt for the first year or so, after which rising wages (on the back of higher inflation) eroded the cost of the mortgage, making it possible to consider a larger home.

Now they wear a hair shirt forever, with little prospect of upsizing.

Sustainable? - not!

Wednesday, June 14, 2006 06:49PM Report Comment

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4. The Ditherer said...

Uncle Tom,

I well remember as a lad going to see Tom Bairstow who was the manager of the Head Office branch of the then Bradford and Bingley Building Society in Bingley Main Street to discuss the possibility of a mortgage. I cannot tell you whether Tom had any slick qualifications but I can vouch for the fact that he knew a thing or two about money, and this may well have been learned the hard way from his own experience and that of his parents. He was quite adamant that the first thing I must do is to show my ability to save regularly, and once I had saved a sum of money for a deposit upon a house the Society might then consider me worthy of a mortgage. Such mortgage would be no more than 2.0 or 2.5 times my annual income, and if I were married plus the second income. Of course, these rules (saving for a deposit) and loan multiples were there for a reason, and that reason was to provide the borrower with a 'margin of saftey' so that whilst one might have to wear a hair shirt for a year or two, thereafter you could start to live a little. As you say we now have a generation that will forever be attired in a hair shirt with all that implies for the next stage of family development.

Wednesday, June 14, 2006 08:26PM Report Comment

5. denzil said...

>>Err... traditionally it was 2.5 times first income plus the second income (x1) if there was one.

I got offered 4.5 * joint by a main lender just last week. Deposit was a 50% so I think they felt safe but could not give a toss about my affordability.
Could have gone to 5 * joint if it was means testing. I told the person on the phone that they may be mad but not I.

Wednesday, June 14, 2006 10:29PM Report Comment

6. Rimmer said...


they dont care as the laws have changed a lot since the late 1980s, you cant hand back the keys now, or should i say you can hand back the keys and be rid of the debt

Friday, June 16, 2006 12:14AM Report Comment

7. denzil said...

Ahh those halcyon days!

These days it's all about to returns to investors. There's little thought given to the borrower. In most cases the borrower should take some responsibility for their actions but that responsibility should be based on solid financial advice from the lenders and the likes of "Tom Bairstow".

Friday, June 16, 2006 08:58AM Report Comment

8. bidin'matime said...

Now when I were a lad I was told to save regularly to get a good track record with the building society, so that, when I needed a mortgage, I would stand a better chance of getting one. That day eventually came and, armed with my pass-book, I approached the local manager at the Halifax building society. The multiples stacked up (I recall 2.5x my salary and 1x my wifes) and our deposit was all in order, but alas, they had already lent up to their quota that month, so could not offer any more loans come back next month!

Fortunately we found someone else who still had some quota left, but this true story (from the late 70s) would sound like a work of fiction to a younger borrower.

Friday, June 16, 2006 01:27PM Report Comment

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