FSA ban on mortgages of more than 3 times salary

[fishnet]

So if the FSA ban mortgages for more than 3 times salary how exactly will that work. Presumably the market will just go into freefall since basically if you earn less than £40k you'll be priced out of the market.

I cannot see how this can go through!

What happens to people who have higher multiples and want to remortgage? they'll be stuck with standard variable rates praying that their bank doesn't pull the mortgage on them (as seems to have been happening quite a lot).

Its bizarre. Surely affordability is about more than salary multiples?!

But surely that's the point, with normal interest rates x3 is affordable. We are in this financial mess, as people (and banks) borrowed (leant) too much to people who could not pay back when the times got tough.

I think its a good idea. House prices went through the roof, and were priced out the market for most BECAUSE banks leant over xz3 times salarties.

Well that's the property market completely screwed then.

I can't see it happening really.

If this goes through the market will be in freefall.They will prob make it 3x joint or something as otherwise the housing market is toast.It will put 1000s of people into neg equity

But affordable isn't just about salary multipliers. If you bring home £1000 a month and have utilty bills, council tax, food etc you might end up with £500 to spend on a mortgage. If you bring home ten times that you don't spend ten times the amount on bills and food etc. It changes as you earn more.

I agree that the multiples being allowed were silly and that people overstretched themselves but affordability isn't just about multipliers of salary.

People will have to earn large amounts of money to be able to afford anything and the market will completely crash. Forget the further 15 per cent fall they are currently predicting. It will have to be about 50 per cent more for those at the bottom to get onto the ladder.

What?! Is this for real? We're stuffed then, on our 5 times salary, 6% fixed for the next two years. And we want to borrow a bit more.

I can't work out from the news reports whether this is just a proposal being announced this week or whether its actually going to be brought in.

The UK banks lending people stupid amounts of money on 100% mortgages were responsible for our property bubble and subsequent crash, but they were not responsible for the global 'Credit Crunch' which was largely to do with the US housing market, CDOs and all that stuff.

Where is the logic in cutting stamp duty for a period of time and then putting a cap on mortgage lending - it just doesn't make any sense!

It is currently a proposal but has huge backing it seems.I think its a great idea maybe not atm but in future it will make the market fairer and there will be different price bands with more chance of first time buyers re entering the market.It is the only way to stop a repeat of all this mess.Average prices will half by 2010 anyway imho

The problem is not the multiplier but % of loan ... no housing market is a healthy one when people borrow 100% or more of the value of the house ....

I also question this property market lumped into a single entity - there will always be a market for affordable housing - speculative, buy to let, overseas property has shown to be the biggest losers ...

Where I live a bog standard victorian 3 bed terrace is about 3-400k and apparently the average local salary is 22 so we are stuffed here

3 times salary is too restrictive. A couple earning £100k (a decent joint income) could only borrow £300k. You'd need to earn a fortune to buy a family home in some parts of London.

how will it create price bands? I don't get that notion. I mean surely the varying sizes of deposits people have available also contribute towards how much they spend (or don't) on a house as well as how much they can borrow?)

If you are earning 100k and you can borrow 300 houses will have to come down to that.Many people can't afford the ludicrous deposits.i read an article somewhere about prices and bands will look for it.

but then chances are no-one would be selling them as they'd have ludicrous amounts of negative equity so couldn't afford to sell - so Jo Bloggs sat there with their mortgage for £300k still wouldn't be able to buy anything as no-one would be putting anything on the market

It's not sustainable long term. People in their 20's in the SE should be looking at getting on the first rung of the ladder - they'd have to be earning over £50k each as a couple to do that, and not many people in their 20's do, so a very divisive system.

5 years later when they want to move, they'll be very few buyers, and the cost of stamp duty etc would probaly outweigh any increased deposit they'd have.

although if prices halved it would probably work....

If you are earning 15k and can borrow 45 then there will have to be properties at that level for the market to even survive.Ridiculous increases will be a thing of the past If your 45k flat rises to 60 you may have 15k deposit and your salary may have increased and so you can buy a bigger place with garden for example.the prices will fall to fit the mortgage market not the other way round

The biggest concern will be those who have borrowed more and can never remortgage.

They are also likely to be in serious negative equity so will not be able to sell either.

I have always thought something big would have to give and many may get sacrificed to save the market in the long run.As things are now no one can win.Agree negative equity is going to be huge and repossessions figures rocket.

Personally I don't think house prices will drop, people will just be forced out of the market and into renting. Noone in their right mind would sell their house if it had a huge amount of negative equity, they will just wait until the market rises again; which it will, as it always does.

But it won't rise again JodieO, that's the point. If there is a ban on mortgages of more then 3 times salary then it will never be able to basically because the couple earning £100k who borrowed £500k to buy their house with a £100k deposit in 2007 have already gone into negative equity. Now they can't sell their house but will have to find a couple who earn nearly 200k to buy their house.

It won't happen.

Agree fishnet the govt fsa et al will sacrifice these people in order to get the market and banks moving again as they have much to lose if they don't

and what happens to rental prices while more and more people are forced into the rental market?

This govt could do worse than regulate rentals

So how will this get the market moving again? Surely people will just avoid selling their houses even more.

Imo the fsa ban won't happen for many reasons, mainly as there won't be houses available because people would rather sit on negative equity than sell and actually have it. On paper it's ok as long as you can still pay the mortgage but in reality, if you sell, it's a whole different story.

Rental prices will go up if this goes ahead too imo. I'll be very surprised if this happens. The market is cyclical and always has been.