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?!

Am I right in thinking that the crazy houseprices of the last few years happened in part because of lenders offering mortgages of more than 2.5 or 3 x joint income?
So going back to this original rule for any new mortgage offered should see prices drop. Because if the majority of couples could only afford a max of £80,000 for their starter home then there would be no point vendors holding out for £100,000?

Or am I waaaay of the mark and a bit confused?

People in negative equity will have to sit tight and be happy with what they have.Everyone else will have to adjust

thumbwitch thankyou I'm still so angry about it...can say everything happens for a reason but....! Luckily we still have a deposit, but when we will ever buy our first home is just beyond me at the moment.

I guess the lure of all that extra money was just too much. We probably could have gone back and borrowed more, but we took the moral high ground, than very rapidly got priced out of the market. Heigh ho

Some prices are finally coming down anyway. Two houses I've been following one was on for £1.3m now on for £729. Other on for £865 now on for £450.

"Because if the majority of couples could only afford a max of £80,000 for their starter home then there would be no point vendors holding out for £100,000?"

Well there would be a point if they'd got 100k owing on the mortgage for the house they're selling - otherwise they'd be in negative equity

So you get all the current renters (with a deposit saved and a good credit rating) onto the home owner bandwagon, and chuck a whole load of current home owners off

people who have overstretched themselves will suffer, yes

but lower house prices means more people can buy

and less people enslaved to their mortgages - more people can afford to be SAHMs!

and builders built houses for YEARS when mortgages were capped at 3x salary! They have just been raking in silly profits for the last 15 years by selling on cheap housing at extortionate rates

Thousand of course - otherwise they really would be dramatic drops!

but noddy - not everyone moves home for something "better" - there all sorts of reasons why people need/want to sell/move.

Plus 3 I don't think you will have to wait long.I actually am thinking now is a good time to try and sell with the low rates good weather coming and QE.Once they implement 3x salary it will fall apart pretty fast

You lot type too quickly

I know FAQ these are the people I feel for asthey will be sacrificed to keep things on track

I agree noddy. If this comes in there will be a lot of people trying to sell quickly.

so are they definitely going to do this?

The market is stagnant at the moment a) because people can't mortgages because the banks won't lend and b) people don't want to sell because they won't get "enough" for it.

If this proposal is enforced then banks will only be able to lend 3x salary, but if there is a shortage of sellers at those prices then people still won't be able to buy a house.

And if this forces prices down massively as seems likely, then banks will be reluctant to lend while prices are still falling.

So it could still be years before things pick up.

Don't get me wrong, I think houses have been vastly overpriced for many years, but I'm not convinced the government will let thousands more people (voters) end up losing their homes because they can't re-mortgage, especially when all the talk in the past few months has been about getting the banks to start lending again.

haha - try to sell quickly in the current market - they'll have more chance of flying to the moon

Our house was on the market for 4 months, 2 viewers, no offers, the price we were asking was enough to pay solicitors fees and repay the money oustanding on the mortgage - not a penny more.

We didn't even get any ludicrously low offers on it!

If you can't re mortgage you will go onto the SVR which is a bargain atm!there are actually some good deals atm as rates are lower and more money around but prices are still too high so this is the next step.

The only way the housing 'ladder' (horrible expression) was sustained in the short term was because peple wnated to scramble on and then pull it up behind them - how could anyone have thoguht it as sustainable in perpetuity - it clearly wasn't. People should only be lent what they can afford to pay back, and prices will have to fall to those levels. And for those of us who go into negative equity - just tough! it was a gamble, a speculation and not just a one-way bet.

My parents are going to buy near us.they put their house on the market in the IOW and sold it to first people .We viewed about 15-20 houses over the last 2 weekends and 9 are under offer already.There is def activity atm which has shocked me as I was telling them they'd get a bargain and prices had dropped but we didn't find that at all

nothing shifting round these parts. I know several people who have taken their house off the market and have either decided to just hang on, or move on whereever they were going and rent it out because there's just no interest.

I think the blip in Jnauary panicked some people who had bene holding out and then suddenly thought they'd missed the bottom of the market. I bet half of those currently "under offer" won't proceed to completion as the market continues to fall

So when our fixed rate expires would our lender offer us another deal even if it is higher than 3x income?

Thats what I thought FAQ.I think this will have to be implemented because the banks are being warned not to lend irresponsibly so 3x is the way to go.Even if it is not law it will be practice. banks are still lending just not at the levels of before and are asking for bigger deposits which is essentially this system

those people who are moving on and renting out their existing house will also be affected though won't they since they are doing that one the basis that they can get two mortgages. That option will disappear for a lot of people who can't sell

Getting to completion is the key!

If this happens foreveroptimistic it looks like you might have to stay with the existing lender on your current mortgage but on the Standard variable rate (which as noddy says, is good at the moment) but the problem is that it changes.