PDA

View Full Version : FSA to cap mortgage borrowing



bren586
16th March 2009, 10:47
http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/4995778/FSA-to-cap-mortgage-borrowing.html

"FSA to cap mortgages at max 3 times salary and min 5% deposit."

Is this not going to drive down the price of houses ?

average salary = 24,000 (Aug 2008)

Max mortgage for a single is now 72,000 + 3600 for the deposit.

I assume that they will allow some contribution from the partner but if it was as when I bought my first house then that was just X1

That would make it £96000 top whack for Mr and Mrs average.

I do not see this working for years - all that will happen is people will not be able to move.

bren586
16th March 2009, 10:48
And as it is bound to be posted

Stable door.

Ruprect
16th March 2009, 10:52
http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/4995778/FSA-to-cap-mortgage-borrowing.html

"FSA to cap mortgages at max 3 times salary and min 5% deposit."

Is this not going to drive down the price of houses ?

average salary = 24,000 (Aug 2008)

Max mortgage for a single is now 72,000 + 3600 for the deposit.

I assume that they will allow some contribution from the partner but if it was as when I bought my first house then that was just X1

That would make it £96000 top whack for Mr and Mrs average.

I do not see this working for years - all that will happen is people will not be able to move.

Yes it will. Luckily though, house prices are not included in the govt's favourite inflation measure, so we're still not experiencing deflation :rolleyes:

minestrone
16th March 2009, 10:52
Madness.

My salary is 400 quid a month. I think that should get me a lockup down a lane.

Gonzo
16th March 2009, 11:18
And as it is bound to be posted

Stable door.It is the bumper mortgages that lenders have been prepared to lend (because it is different with low interest rates), along with inflated self-sert mortgages that has kept the housing bubble going for as long as it has.

Vendors hoping that the current downward movement in prices was a temporary blip will have to revise their expectations somewhat.

DimPrawn
16th March 2009, 11:20
I made an offer on a house at the weekend, less than 10% below asking price, cash purchase. Vendors came back 5 minutes later saying they will only accept offers over the asking price.

To buy the house I was looking at would require a salary of over £250K pa. under the new rules.

:rolleyes:

BrilloPad
16th March 2009, 11:24
Who cares what first time buyers do? It seems only cash buyers can compete.

We need a tax on second homes.....

Moscow Mule
16th March 2009, 11:28
Who cares what first time buyers do? It seems only cash buyers can compete.

We need a tax on second homes.....

More tax is not the solution to every problem.

PM-Junkie
16th March 2009, 11:28
We need a tax on second homes.....
Possibly.....but that would need to be handled very carefully, otherwise the rental sector would suffer a collapse too because people would just try to pass the tax onto tenants.

TheBigD
16th March 2009, 11:30
We need a tax on second homes.....

Wouldn't that be Stamp Duty? On the assumption that the cost of an average persons first home is under the stamp duty threshold.

BrilloPad
16th March 2009, 11:31
Possibly.....but that would need to be handled very carefully, otherwise the rental sector would suffer a collapse too because people would just try to pass the tax onto tenants.

It would certainly be a nightmare to implement. Maybe first step is disallowing mortgage tax relief on rental income?

PM-Junkie
16th March 2009, 11:35
It would certainly be a nightmare to implement. Maybe first step is disallowing mortgage tax relief on rental income?
I do like the idea...but as you say, a nightmare to implement. Second homes are one of the big contributors to house price inflation, and a huge factor in village life being eroded away.

sasguru
16th March 2009, 12:02
I made an offer on a house at the weekend, less than 10% below asking price, cash purchase. Vendors came back 5 minutes later saying they will only accept offers over the asking price.

To buy the house I was looking at would require a salary of over £250K pa. under the new rules.

:rolleyes:

And then you woke up and had a cup of tea. Nice.

bobhope
16th March 2009, 12:26
Where can you sign up for a job like that where you get to state the obvious?

crimdon
16th March 2009, 12:29
I do like the idea...but as you say, a nightmare to implement. Second homes are one of the big contributors to house price inflation, and a huge factor in village life being eroded away.

Leading to direct job losses as local shops and pubs close down due to lack of customers.

Doggy Styles
16th March 2009, 13:02
There will be pain for those who thought the temporarily inflated price of their home made them rich.

And especially for those who extended their borrowings on the back of it.

But they didn't have to.

Cyberman
16th March 2009, 13:35
And as it is bound to be posted

Stable door.


Indeed. I was suggesting measures such as this over two years ago. About time !!! :tired

Platypus
16th March 2009, 13:44
Conspiracy theory:

They announce this, causing a rush of house buying as people try to beat the deadline for the introduction of the new rules. Sometime later, the new rules are quietly dropped. And because buying activity has picked up, the government can announce that the market has recovered.

Nice!

Platypus
16th March 2009, 13:44
Indeed. I was suggesting measures such as this over two years ago. About time !!! :tired

If only the government had listened to your recommendations, none of this would have happened :rolleyes:

oracleslave
16th March 2009, 13:45
Indeed. I was suggesting measures such as this over two years ago. About time !!! :tired

If you'rer such a visionary, economic whiz how come you still chase 40k permie jobs and didn't sell your house 2 years ago :eyes

expat
16th March 2009, 14:03
Let us prevent the ill-effects of second homes by putting a cap on income so that no-one can afford to buy a second home.

Or how about a Supertax? It was 95% when Brown and Darling joined the Labour Party, I'm sure they remember it with affection.

Cyberman
16th March 2009, 14:16
If you'rer such a visionary, economic whiz how come you still chase 40k permie jobs and didn't sell your house 2 years ago :eyes


I did put my house on the market almost two years ago, but as soon as the banking crisis hit, I decided not to sell because it was obvious to me at that time that holding a property is far safer than risking cash in a multitude of banks where only up to 30K at the time was guaranteed. I would have needed ten bank accounts, so pretty wise methinks !! :happy

d000hg
16th March 2009, 14:22
A 3X limit will surely have a massive impact. Banning 100% mortgages is pretty meaningless now but I was told only last week by my mortgage advisor that most banks still work at 4X.

Wonder if it will actually go through?

BrilloPad
16th March 2009, 14:22
I did put my house on the market almost two years ago, but as soon as the banking crisis hit, I decided not to sell because it was obvious to me at that time that holding a property is far safer than risking cash in a multitude of banks where only up to 30K at the time was guaranteed. I would have needed ten bank accounts, so pretty wise methinks !! :happy

If only we had all listened to the sage of cybertoryshire.

Cyberman
16th March 2009, 14:27
If only we had all listened to the sage of cybertoryshire.


Yes indeed. For a start, if HMG had told Northern Rock account holders that their money was guaranteed we would not have seen a run on the bank. The question is though, were the incompetent HMG aware that a guarantee had been in place since 1982 ? :rolleyes:

Mailman_1
16th March 2009, 15:10
A 3X limit will surely have a massive impact. Banning 100% mortgages is pretty meaningless now but I was told only last week by my mortgage advisor that most banks still work at 4X.

Wonder if it will actually go through?

I was quoted around 6x by Abbey just last week. My current mortgage is with them and I rang to see how much i could borrow for a move up. They came up with over double the amount i needed with no requirement for accounts etc. My FA's advise that self cert and no accounts arent a problem either and are quoting the same rates as the mainstream banks for tracker and fixed price mortgages. A 25%+ deposit goes a long way at the moment.

sasguru
16th March 2009, 15:29
I did put my house on the market almost two years ago, but as soon as the banking crisis hit, I decided not to sell because it was obvious to me at that time that holding a property is far safer than risking cash in a multitude of banks where only up to 30K at the time was guaranteed. I would have needed ten bank accounts, so pretty wise methinks !! :happy

Cretin.

By the time the further 50% drop in house prices takes place, you'll wish you had "risked" the banks. :laugh

milanbenes
16th March 2009, 16:10
fair doos...

sas 1 cyberman 0


Milan.

Cyberman
16th March 2009, 20:09
Cretin.

By the time the further 50% drop in house prices takes place, you'll wish you had "risked" the banks. :laugh


I doubt it. Anybody got money in Irish Banks ? Get it out FAST !!!! :p

OwlHoot
16th March 2009, 21:04
http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/4995778/FSA-to-cap-mortgage-borrowing.html

"FSA to cap mortgages at max 3 times salary and min 5% deposit."

Is this not going to drive down the price of houses ?

average salary = 24,000 (Aug 2008)

Max mortgage for a single is now 72,000 + 3600 for the deposit.

I assume that they will allow some contribution from the partner but if it was as when I bought my first house then that was just X1

That would make it £96000 top whack for Mr and Mrs average.

I do not see this working for years - all that will happen is people will not be able to move.

Yup, they really are as mad as hatters (especially regarding the deposit).

BrilloPad
16th March 2009, 21:07
I doubt it. Anybody got money in Irish Banks ? Get it out FAST !!!! :p

:confused:

OwlHoot
16th March 2009, 22:13
Christ, It's just struck me.

This isn't about a sudden fit of prudence in not lending more than people can afford to repay. The Government must know damn well it will soon cause property prices to plummet, and their already dire ratings with it, and more and more people to go into negative equity.

No, it's rationing! :eek:

Obviously, one way or another, the banks and building societies just don't have enough net funds (taking into account their toxic assets still swilling around) to lend any more.

Or am I being silly, and queazing should take care of that?

TimberWolf
16th March 2009, 23:30
Christ, It's just struck me.

This isn't about a sudden fit of prudence in not lending more than people can afford to repay. The Government must know damn well it will soon cause property prices to plummet, and their already dire ratings with it, and more and more people to go into negative equity.

No, it's rationing! :eek:

Obviously, one way or another, the banks and building societies just don't have enough net funds (taking into account their toxic assets still swilling around) to lend any more.

Or am I being silly, and queazing should take care of that?

Maybe letting good old hyperinflation rip, sorry unrestrained queazing*, is the best plan?

*We could do with a nice euphemism for printing money like there is no tomorrow. Do you think Labour have one already lined up?

d000hg
17th March 2009, 01:04
On the one hand, a 3X multiplier would cap my borrowing at about £200k. On the other hand I wouldn't want a mortgage for over about 210k anyway... and I am quite happy to sit and wait for prices to plummet before buying.

Gonzo
17th March 2009, 01:16
On the one hand, a 3X multiplier would cap my borrowing at about £200k. On the other hand I wouldn't want a mortgage for over about 210k anyway... and I am quite happy to sit and wait for prices to plummet before buying.It will be interesting to see what happens.

Increasing the multiplier has enabled house price growth to outsrip earnings growth by such a large amount in recent years. By removing this stimulation the two will have to realign and that will be painful.

Either house prices will have to drop significantly (which they might), or incomes will have to rise significantly (which they will if you have a good burst of old-fashioned, seventies and eighties style inflation).

Either outcome will not be very pretty. :rolleyes:

bren586
17th March 2009, 08:15
If you can only borrow 3 time income then the first time buyers will only be able to pay X.

This means the people who are moving up from their 2 bed street house will only have a modest (and currently a loss) gain in equity.

It is going to freeze the housing market.

On the plus side, chavs with no money or jobs will not be able to buy anything.

I can also confirm that if you wander in to any high street bank with 25 % deposit they are willing to lend you quite stupid sums of money.

Apparently I can borrow 450K with very few questions and a quite low interest rate.

BrilloPad
17th March 2009, 08:20
Christ, It's just struck me.

This isn't about a sudden fit of prudence in not lending more than people can afford to repay. The Government must know damn well it will soon cause property prices to plummet, and their already dire ratings with it, and more and more people to go into negative equity.

No, it's rationing! :eek:

Obviously, one way or another, the banks and building societies just don't have enough net funds (taking into account their toxic assets still swilling around) to lend any more.

Or am I being silly, and queazing should take care of that?

Gosh : how did people ever last before the 1970s when you could only borrow 3 times?

Oh yeah : there was prudence and people saved up for stuff.

Though limiting people to 3*salary doesnt make much difference as far too many hauses are bought for cash. First time buyers still dont get a look in.

GreenerGrass
17th March 2009, 08:28
It will be interesting to see what happens.

Increasing the multiplier has enabled house price growth to outsrip earnings growth by such a large amount in recent years. By removing this stimulation the two will have to realign and that will be painful.

Either house prices will have to drop significantly (which they might), or incomes will have to rise significantly (which they will if you have a good burst of old-fashioned, seventies and eighties style inflation).

Either outcome will not be very pretty. :rolleyes:

The trouble with relying on inflation to bail us all out is wage inflation has lagged real inflation for over a decade - why would it catch up in the future - especially in a recession/near depression when employers hold all the cards?

Look at permie job salaries in IT, or contract rates for that matter. They are not much higher now than they were in 1999/2000, and could easily head lower. In fact it's quite incredible when you realise how good we had it back then in relation to house prices, even as permies.

DimPrawn
17th March 2009, 08:35
My sister-in-law (the one that got into BTL big time just as the bubble ended) has bought a new build house (at near the peak) which is due for completion in a few months.

I wonder if this law will affect her existing mortgage offer? I'm sure she's borrowed at least 10x her salary.

:suicide:

BrilloPad
17th March 2009, 08:54
My sister-in-law (the one that got into BTL big time just as the bubble ended) has bought a new build house (at near the peak) which is due for completion in a few months.

I wonder if this law will affect her existing mortgage offer? I'm sure she's borrowed at least 10x her salary.

:suicide:

The government would NEVER do retrospective legislation would it? :rolleyes: