Active discussions

Meet the Other Phone. Only the apps you allow.

Meet the Other Phone.
Only the apps you allow.

Buy now

Please or to access all these features

Talk
Property/DIY

Join our Property forum for renovation, DIY, and house selling advice.

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?!

OP posts:
brettgirl2 · 17/03/2009 20:27

I know someone who took one out and went round telling everyone that it was OK because her mum would pop her clogs in the next 25 years anyway .

morningpaper · 17/03/2009 20:29

brettgirl I think that is what people think actually, forgetting that actually they will have to sell her house to pay her nursing home fees...

this article is interesting - basically reckons that average house price will fall to 3 times average earnings...

mollythetortoise · 17/03/2009 20:30

from what i can gather, the misselling of endowments was the start of it, people got wary and it cost banks a lot in compo and so IO mortgages were allowed to be sold without any repayment vehicle AT ALL. IMO, an underperforming endowment where you might have a shortfall of 10k or whatever, is tons better than still owing the entire mortgage. I always wonder if banks expect the entire capital back on the last day of the mortgage?? so on 26 june 2026, you must find £350k or whatever imediately to pay your bank. How will that work in practice for so many people?? what if they don't sell in time? it will involve ALOT of downsizing age 60 when you should be sitting back enjoying the fruits of your labours in your family home. It's going to be a disaster for so many.

brettgirl2 · 17/03/2009 20:32

Well quite morning paper, that was my first thought too.

brettgirl2 · 17/03/2009 20:33

It could be worse than downsizing, if you have saved none of the capital may well be a case of a second hand caravan....

jeanjeannie · 17/03/2009 20:37

Really interesting article morningpaper

blossombelle · 17/03/2009 20:52

Looking at mortgages 3 yrs ago was scary - interest only, 110% offered to us "so you can do some home improvements" straight away WTF, multiples of over 8x. We had one broker offer us a £225 mortgage, when I asked what the monthly repayments would be, it was more than my monthly salary. This is with a 10% deposit.
Yes it is down to the individuals to say no to these deals, but they should have never been offered in the first place - boom never lasts forever and I really think they thought that the repayment would be from market inflation. I am just glad to some extent to own a house now, as my fellow graduates don't stand a chance to get a mortgage of any sort now, without 40% deposit, which means the Bank of Mum and Dad gets raided again!

ElfOnTheTopShelf · 17/03/2009 20:58

when we were looking for mortgages, we saw a broker who recommended us a 120% mortgage.
We went with NR anyway (they were the ones offering 120%) but their stipulation on that was that you had to be 21.

I think house prices are now not far off the 2003 prices. My sister had her house valued last week, it has "fallen" from 120k when it was last valued to 70k. She got it in 2003 for 65ish

brettgirl2 · 17/03/2009 21:03

I think the home improvement concept is also an interesting one. Why not live with the avocado suite until you can afford to replace it?

ElfOnTheTopShelf · 17/03/2009 21:09

Not all home improvements are new sofas

120% mortgages were typically aimed at buying a run down house and using the rest of the money to fix it up properly.

While I think it is a sad crazy situation at the minute, I do think the the house prices needed to fall, my sister is a hairdresser and even with her partners decent wage she could not afford anything. There are new builds near us, 2 bed apartments, starting price 90k!

brettgirl2 · 17/03/2009 21:13

I am talking bathrooms not sofas, you know nasty green colour, popular in the 70s. We had ours for 4 years and lovely it was too!

My point is that if it works you can live with it. There's no need for new, shiny facilities.

ElfOnTheTopShelf · 17/03/2009 21:18

I've seen avacado sofas, hence the confusion

morningpaper · 17/03/2009 21:25

lol I think I have mashed avocado on my sofas...

UnquietDad · 17/03/2009 21:29

morningpaper - 15 years ago, x3 salary was indeed all that most banks would lend. However, it was all you tended to need. 15 years ago, a 3-bed semi here in a reasonably nice part of Sheffield would have sold for £70,000 - well within the reach of, say, two young teachers on about £15K each. These days, even post-credit-crunch, it would be nearer £160K - and those two young teachers would not be earning much more. Maybe £18K or £19K. Screwed.

ElfOnTheTopShelf · 17/03/2009 21:30

I always seen to have chocolate on mine. Why we thought it would be a good idea to get cream sofas is beyond me. Luckily they have washable covers, and are very familiar with my washing machine

Quattrocento · 17/03/2009 21:30

Thinking about having a mortgage of 3x joint salaries makes me wince. What are people on when they take up mortgage offers of ludicrous multiples? More importantly, what are (or were) the lenders on? Madness.

Glad the whole situation is going to be regulated.

morningpaper · 17/03/2009 21:31

I remember having a friend who was posh because she had wall-to-wall carpets...

UnquietDad · 17/03/2009 21:33

Quattrocento - for people on the national average salary, a mortgage of 3x their joint salary might only mean £60-80K. Even today, barely enough to buy you a box in most parts of the country.

UnquietDad · 17/03/2009 21:34

OK, maybe more like £100K, but still not enough.

morningpaper · 17/03/2009 21:35

well quite but if AVERAGE house prices fall to that level, then they can afford flats and small houses etc.

ElfOnTheTopShelf · 17/03/2009 21:35

when we're talking 3%, is it 3% of joint, or 3% of main earning + a % of the second?

morningpaper · 17/03/2009 21:36

In the olden days i.e. when I were young, it was 3x one salary or 2.5 times joint

Quattrocento · 17/03/2009 21:36

I think the national average salary is around £24k. Three times double that and you would end up with around £140k. Which is quite close to the national average house price, in fact.

morningpaper · 17/03/2009 21:37

I think the theory is that a house price should be 3x ONE person's salary, and that is the base level that it falls to

UnquietDad · 17/03/2009 21:38

But how long will it take average house prices to fall to that level?

At their peak an average nice semi in an averagely nice area was still about 10 times the salary of a young teacher and probably, what, 12-15 times that of a young nurse.

In certain postcodes in this city you have to be a lawyer, a doctor or "independently wealthy" to afford what look really like quite nice, normal family homes - not mansions.