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Original poster

FSA ban on mortgages of more than 3 times salary

234 replies

fishnet · 17/03/2009 16:17

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?!

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Original poster
fishnet · 17/03/2009 17:06

Good point FAQ. Short term presumably rents will rocket. Longer term, once the market has settled to a much lower level it won't be viable as a business proposition to buy and let out property. If people can eventually buy property much more cheaply then why would they rent.

I can see that longer term its the right move and will ensure stability in the market but if this happens then the market will be dessimated in the short term

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morningpaper · 17/03/2009 17:06

the market has been SILLY over the last 15 years

When I were a lass and bought my first home 15 years ago, x3 was THE MOST banks would lend - and rightly so

Now people are saying "If the interest rate goes up to 10% then we'll be fucked!"

wel deeeer this is because you were lent too much money in the first place

ForeverOptimistic · 17/03/2009 17:07

Well we will be living in a cardboard box if this comes in.

ruty · 17/03/2009 17:11

so what should people do who bought in the last two years? Sell now and wait for a huge drop? Or sit tight and hope over time their house will regain the value that they bought it for? Or will that never happen?

morningpaper · 17/03/2009 17:11

I think anyone who borrows more than 3 times their salary is a bit mad tbh

house value is so meaningless

Original poster
fishnet · 17/03/2009 17:12

I agree to a point JodieO but those who are in negative equity don't always have a choice. The bank owns their house, they don't. The bank can pull the mortgage if it wants to. There was a lady on here the other day whose son had his mortgage pulled when he wasn't even in arrears. Plus there will always be people who have to move due to relocations, divorces etc. You will never have a situation where nobody moves.

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morningpaper · 17/03/2009 17:12

I don't think it will happen ruty

FAQinglovely · 17/03/2009 17:13

so...........more people losing their homes due to repossession, prices rocket.

Those people (along with many already renting) are never going to be in a position to buy a house (or more to the point have a good enough credit rating to get a mortgage) so the prices are going to stay high for a very long time - and what happens to those currently living in the rental market - how are they supposed to afford the increased rental prices too??

Just doesn't make sense.

ruty · 17/03/2009 17:13

you think the value will permanently be reduced mp?

noddyholder · 17/03/2009 17:15

Why will repossession cause rocketing prices?

Original poster
fishnet · 17/03/2009 17:16

Oh for that crystal ball Ruty. But if this does come in then how can prices ever get that high again?

I just want things to settle one way or another but can't see that happening with the massive job losses we're going to see over the next few months.

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DaisyMooSteiner · 17/03/2009 17:16

Rocketing rental prices, because more people will be buying, fewer renting (at least in the short term)

morningpaper · 17/03/2009 17:18

Yes I think the value will be permanently reduced

the banking system collapsed largely because of over-valued housing stock across the board - people borrowing against 'house value' which is meaningless

property prices have become silly

lending 3 times salary is the max I think that is SENSIBLE

noddyholder · 17/03/2009 17:18

Oh i see don't think that will happen though i really think the govt will tackle the rental market next.

morningpaper · 17/03/2009 17:18

(bear in mind that my job is making four-page websites so I don't actually know anything about anything however )

Jux · 17/03/2009 17:19

About 20 years ago, 3x salary was the standard maximum. Some got higher multiples by being self-employed and showing projected earnings etc, tweeking the books to show higher income etc. The bubble burst and many people who had fraudulently got mortgages of higher multiples were left in negative equity.

More recently, it has become commonplace to lend far more, but this is all part of the thoroughly irresponsible lending which has been going on.

It used to be really frowned on to lend more than 3x; this seems fairly sensible, especially in the light of current events. Though it is difficult to work out what to do about people who have routinely been lent considerably more without penalising them.

plus3 · 17/03/2009 17:20

can I just say that I can't wait for the market to return to sensible levels, and that maybe initally 1st or 2nd time buyers should be restricted to 3x salary.

We got completley screwed as 1st time buyers at the time of the massive increases.

We were all set to buy our 1st home at 3x salary for £150k (2 bedrooms, outer london) we got stuck in a chain, where the top were needing to relook to accomadate a sick relative. We hung on, and when it can to exchanging they had their house revalued because their estate agent said it would be worth their while.....it was revalued £50K more, which filtered down to us as 1st time buyers with our little house now revalued at 185K we were at our limit, and pulled out.

6yrs later, a change of career for DH, and 2 children we are still renting, and a decent 3 bedroom house which is nothing special is currently on the market for £350k....

Something really has to change.

FAQinglovely · 17/03/2009 17:21

but more people aren't going to be buying any time soon - even if they introduced the proposals tomorrow - repossessions are rising as we type, people are losing their jobs, ending up in debt - they're not going to get another mortgage, many currently in rented are never going to be able to buy (for similar reasons - excluding the repossession on their credit file). Or are they going to get the (now very hard to find) 100% mortgage - as I'd bet my bottom dollar that many currently in the rental homes won't be able to raise a deposit

There's more and more people landing on the rental market now. If you force people into negative equity and the same happens to them as happened to the lady fishnet mentions they also end up renting.

FAQinglovely · 17/03/2009 17:24

lol - I'm an organist so no nothing either - all I know is that we got a 100% mortgage for our first house, made 25k on that and used it for a deposit for our 2nd house which we got 4x our (well his - I wasn't working) salary lent to us. Which we could afford, even if interest rates went up............

Unfortunately we didn't take into account splitting up - so that kind of screwed up the mortgage repayments

noddyholder · 17/03/2009 17:25

I agree something has to be done.The area I live in went nuts with a combination of schools and silly lending.Last year it really slowed and nothing was selling and what did sell very reduced.However in the last couple of weeks since Ed balls said he thought of scrapping the lottery system for schools(currently trialling here)a huge amount of local houses have sold and prices are looking high again .There are so many factors to consider

thumbwitch · 17/03/2009 17:25

plus3, that's disgusting really - if sales had been agreed at original prices, that is morally corrupt to have everything revalued. Shame you weren't in Scotland.

DaisyMooSteiner · 17/03/2009 17:28

noddy, did you see my question - why will this get the market moving again?

duckyfuzz · 17/03/2009 17:30

I think x3 in principle is a good idea, we have never borrowed more than 2.5x joint despite being offered it and I'm extremely pleased we didn't. I know it will be hard but it will force prices back to a realistic level and no doubt banks will be allowed some discretion, as they were in the distant past. Remortgagers will be stuck with their current provider, but they do at least have mortgages

noddyholder · 17/03/2009 17:31

I think only people who over stretched will suffer.OTOH first time buyers will reappear.Mortgages will be lower thus repayments lower which will free up more disposable income to spend on other areas of the economy which has got to be good.It will stop the housing market being all about making £.ATM the whole economy is hanging in the balance because of silly lending.

Original poster
fishnet · 17/03/2009 17:32

Presumably Daisy because once prices are once again affordable then people will start to buy. Whether anyone is willing to sell is a different matter but ultimately those sellers who currently have their heads buried in the sand will have to pull them out again and face up to the fact that if they want to sell it will be at a lower price.

(I know I'm not Noddy )

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