Wednesday, September 1, 2010

Oh another reason for house prices to drop

Home loan squeeze leaves self-employed stranded

Millions of self-employed people could be shut out of the property market because banks are using their lowest annual income to decide if they can afford a mortgage. Using the lowest rather than the average income over three years can have disastrous consequences, as the incomes of many self-employed people can vary hugely — or they might have had one particularly bad year. The restrictions could leave them unable to find a new mortgage or buy a new home.

Posted by mark @ 11:51 AM (1434 views)
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6 thoughts on “Oh another reason for house prices to drop

  • “Using the lowest rather than the average income over three years can have disastrous consequences”
    Using the lowest rather than the average means they can only get a smaller mortgage so they can either rent or get a smaller house.
    Using the average rather than the lowest means that they can get a big mortgage which, if they have another bad year they can’t afford to repay so they get repossessed.
    I’d say the latter is far worse than the former, so really the only disastrous consequences are for existing home owners because this will push prices down more.

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  • Previously, the self employed relied on self cert to ensure that they could be loaned enough to join the housing treadmill. Now, lowest recent income will betaken as the determining factor on whether they are credit worthy.
    Surely this is more downward pressure on house prices

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  • builditandtheywillcome says:

    Being self-employed,and in the building trades,this will definately bring more downward pressure on house prices.The last two years have been tough,money-making abilities have been squeezed.I definately need house prices to fold now,to be able to be in with a chance of buying a home for my little family!

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  • builditandtheywillcome says:

    BTW……hello everyone,the above was my first ever post after a good three years of watching in on this site!

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  • Well build it

    Welcome

    We have few things in common.

    It’s very tough being self employed and anyone who can take it on and show any sort of profit over a couple of years should be taken seriously by the banks.

    I for one will suffer as I’m self employed and in the office fit out market.

    Self cert were for the likes of us as we are more able than most to control our finances.

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  • There was a premium in place on the rate for those of us prepared to predict our future earnings. Unfortunately this has been abused.

    Personally if you have a good ( min 25percent) deposit and can show some sort of sensible track record then the actual multiple to me seems less relevant than someone only likely to earn a regular income.

    But if they do get much stricter it can’t help increase prices, so good overall I guess.

    I will struggle to buy though in 18 months time.

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