Tuesday, September 30, 2008

Another myth exposed…

Lenders refuse mortgages based on City bonuses

We were told high-end, prestige homes in the £1m+ bracket would not experience as severe a decline as the rest of the market due to continued demand from the wealthy. Oh well, looks like demand from the wealthy was based on cheap, dodgy credit just like the rest of us - lenders are now refusing to lend on the basis of job bonuses (can't believe they were doing this anyway as a bonus can never be a guarantee). There goes the City end of the market overnight...!

Posted by an bearin bui @ 04:30 PM (1094 views)
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9 thoughts on “Another myth exposed…

  • I am not sure this is such good news. When there is a flight from the top end of the market towards cheaper accomodation, I am going to be in competition with people I would rather not be.

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  • This just serves to remind us how insane house prices still are. When a banker on a six-figure salary still needs to take out a mortgage based on his or her bonus, then prices are really too high.

    @stillthinking,

    Deposits are going to be much more important in the future. As long as you have saved up a tidy sum, you’ll be front of the queue ahead of all those ex-bankers.

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  • I was looking at london property prices at the weekend. I’m a professional and I finish my postgrad training in about 1 years time (in the midlands) and will then be looking for a job, most of which are in the London area. I’ll be a first time buyer, but my other half sold her flat at the peak of the market, so we have a bit of a deposit. I calculated that, given a sensible mortgage plus our deposit, we should be able to aim for a home of 300k max. We have a young child, so I specified 3 bed minimum and ‘house’ as we would like a garden. I searched a number of half decent areas of London (not the exclusive villages, but other decent spots that I vaguely know of).

    Several of the areas I searched only showed flats for anything less than half a million quid. You could get a dutch barge for 450k moored on the Thames. By the time I found a 3 bed semi in a reasonable location, I was hitting 700k.

    So then I thought – well what about those boys on the HPC website who reckon the crash might be as big as 40-45 %? I rounded it up to 50% (given that things seem to be going from bad to worse right now), and searched properties at 600k, figuring if the crash was particularly bad in London then I might be able to afford a 600k property in a year or so’s time, for just 300k. Well I have to say – a crash of 50% in London doesn’t even start doing justice to London property – even at 600k I was still finding mostly flats and maisonettes. I’d heard that propery was ridiculous in London, but I didn’t realise it was that bad. Even figuring in a mammoth HPC, I still ain’t going to be taking a job in London.

    Add to that – my job opportunities are drying up faster than you can say ‘assett recovery plan’, with the job market for my line of work suffering a cardiac arrest along with the businesses we serve. And this should worry you, as I provide technical consultancy for ‘proper’ industry – engineering/manufacturing and the like – but the jobs have gone just the same. Add to that doubts over whether I’ll get that mortgage for a 300k home anyway, with the banks not lending… and I’m now regretting wishing for a HPC!! So I’ve poured myself a glass of 2.99 Bulgarian Merlot (which is all I can bloody well afford with my council tax and gas bill), lit a cheap hamlet cigar (how appropriate), and I’m now contemplating switching back to the other camp – the ‘ we’ve got sound economic fundamentals it’ll all come good in 6 months time there’s a shortage of property don’t you know’ camp. I guess I’m becoming ‘collateral damage’. Perhaps if I say ‘supply demand supply demand’ over and over again, I might start to cheer myself up.

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  • Oh this is soooo inevitable.

    The mainstay of the high end of the property market itself loses credibility.

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  • This attitude to lending could have an impact throughout the whole mortgage/housing market, as a lot of ‘ordinary’ workers are commission paid. Wonder what a lender would be prepared to offer my hubbie who is only on £12k basic (gross) working in car sales. Past few years he’s earned around £32k (gross) but if I were a lender, I’d be reluctant to offer a mortgage on more than around £20k presumed gross salary. New mortgages and is also going to affect commission paid people coming off fixed rates and who need to remortgage or move on to SVR.

    The motor trade (and I expect many other commercial & retail sales areas…all commission paid) is beginning to feel the pinch, so this is going to affect a lot of households.

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  • @Archijc,

    Most people in London start off with a flat in a less desirable area then work their way up to a house with garden in a good area. It’s nigh impossible to jump straight onto the top rung of the property ladder. After five years in a smaller flat or house you’ll have a bit of equity and hopefully a higher salary so you can trade up to something bigger.

    If you absolutely need to be in London, you could look around Tooting or Colliers Wood. There are some nice three-bedroom houses around the £300,000 mark. Further out in Surbiton or Sutton you’ll find prices from around £250,000.

    If you can cope with commuting you’ll find your money goes even further outside the M25. For example consider Basingstoke: it isn’t posh, but it’s 45 minutes from Waterloo, £320/mo for a season ticket, and you can buy three-bedroom house with ample garden for well under £200,000. It has no teenage stabbings; but also no cultural amenities.

    Of course, I wouldn’t buy in the present market…..

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  • Drewster’s right Archijc. I’m not sure what areas you were looking at but those prices seem a bit too high. I lived in North London for 20 years and if you want to live there the biggest thing you have to do, unless you’re stinking rich, is prepare to compromise. Have a look around Harringay, you can still get nice 3 bed terrace properties there for less than 400,000 (and they’ll be a hell of a lot less in a year). I think there’ll be quite a high percentage of BTL properties around there too. It’s not Maida Vale or Primrose Hill but neither is your pay packet.

    There’s no need to regret ever wishing for a HPC because it was going to happen irrespective of whether you wished for it or not. Nothing was going to stop this bubble bursting.

    Good luck.

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  • planning4acrash says:

    Archijc, talk about jobs drying up. I’m a planner. Its hellish. I’ve been out of work 1.5months and have been forced to commute 1.5hrs either way, out of London, because the London market is Dead. This is unprecedented. I used to be able to get a job in a day, in London. I was aiming to get a permanent job because I saw this coming, but left it too late and didn’t see quite how bad it would be.

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  • Archijc – not sure how much you can spend on rent a week, but realistically you could get a 3 bed with garden in Fulham, Putney, Wandsworth for £500 / wk, and you might be able to negotiate less as I don’t see that the rental market is as bouyant as the press make out.
    Also, looking south where you can commute to London Bridge / Waterloo and then look for anywhere that has new builds as these will be bleeding.
    Hope that helps

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