Active discussions

Meet the Other Phone. A phone that grows with your child.

Meet the Other Phone.
A phone that grows with your child.

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:
morningpaper · 17/03/2009 21:39

I guess if they top mortgages at 3x salaries then house prices will fall faster

UnquietDad · 17/03/2009 21:40

I meant 3x one salary, so £60-80K is right.

morningpaper is right, they only used to offer 2.5 times joint.

ElfOnTheTopShelf · 17/03/2009 21:40

It was 3x main and 1.5x the second when I took mine out in 2002, which always seemed sensible.

thumbwitch · 17/03/2009 21:41

I bought my house 13.5 years ago - there were only 4 lenders that would lend more than 3x my salary at the time - I needed 4x. So I was limited to who I could borrow from but NO ONE was offering more than 4x salary and I only got that because I had more than 20% of the sale price as deposit; for 100% mortgage, I couldn't have got more than 3.5x salary (and even then it would have been difficult).

If people save for their deposits, will they still be only allowed to borrow 3x salary if this new scheme goes through? Or would they be able to get more, having demonstrated saving skills with money (and thus possibly a better idea of money management)?

Quattrocento · 17/03/2009 21:41

Do you not think that people's expectations are quite high when it comes to housing?

There's an absolute sense of entitlement to owning a home in the UK which is slightly odd really.

thumbwitch · 17/03/2009 21:42

created by Thatcher's government - or if not created, certainly fostered.

ElfOnTheTopShelf · 17/03/2009 21:44

In some areas, they ARE at 2002 prices. We were looking for houses in 2001 and it was manic - you saw a house in the paper and by the time you saw it, it was gone. House prices were just going up and up so fast. A few people I know who had their houses around the same time have had their houses valued in recent months, and they're similar to the value of 2002 for if they were put on the market now.
And anybody who has a house on the market now will probably be suffering weekly calls from the estage agents to drop x %, such as they did with me when our house was on the market.

morningpaper · 17/03/2009 21:44

The days of 100% mortgages are over thumbwitch

LibrasJusticeLeagueofBiscuits · 17/03/2009 21:45

You know it's not just people who have over-stretched who will be harmed if this proposal goes thru, we have a mortgage payment we can afford but as we bought in our early 30s we had saved up a hefty deposit. A lot of our friends are in the same position. Ok because of the deposit we may not have negative equity but that is still our money we saved which has gone down the toilet. Whilst our house is our home and not an investment we will probably have to move in the next 3-4 years due to work.

pointydog · 17/03/2009 21:46

two young teachers on £15k each?! Is that really what they ar epaid?

thumbwitch · 17/03/2009 21:47

ok MP - I have no doubt you are right - what sort of percentage of the house price must people come up with as a minimum deposit now then? Is it 5% (as it used to be) or more?

Quattrocento · 17/03/2009 21:47

My understanding of the FSA proposals is that it is not yet clear whether or not the 3x income cap applies to sole incomes or joint incomes

They're moving to abolish the 100% mortgages though, aren't they?

pointydog · 17/03/2009 21:47

11 years ago, we could get 3x one salry or 2.5 x joint.

Full circle

pointydog · 17/03/2009 21:48

we had to have 5% minimum as deposit

pointydog · 17/03/2009 21:49

I know someone with an interest only mortgage. I suspect they just want to keep going until they get an inheritance

morningpaper · 17/03/2009 21:50

at the mo you need 15-20% to even get a mortgage - 40% for the best deals

pointydog · 17/03/2009 21:52

WOW

thumbwitch · 17/03/2009 21:52

wow, so that's going to become really really hard if the rental market goes boom as well then - how are you supposed to save? Or is it going to go back to people staying at home until they've saved the deposit? Could reduce the need for some of the extra housing, I suppose.

ElfOnTheTopShelf · 17/03/2009 21:55

gosh, 40% is scary!

we saved our deposit by stopping going out after work, rather than us going to the cinema or for dinner, we'd go to Macdonals from work, buy a happy meal and hide away in the corner all night til we went to our homes

ponders how many happy melas it would take to save 40%

UnquietDad · 17/03/2009 22:26

pointydog, no, you've missed what I was saying - that's what they were paid in about 1994.

UnquietDad · 17/03/2009 22:28

quattro, know what you mean about sense of entitlement and maybe some young professionals expect too much straight away. However I do think it is a reasonable expectation that, after you have been working for 5-6 years in a professional role, your own house should be one of the things starting to be within your grasp.

ElfOnTheTopShelf · 17/03/2009 22:35

the thing is, somebody has to own the houses, even if it to rent them out.

thumbwitch · 17/03/2009 22:59

well with all the repossessions going on at the mo, the banks and building societies could start up their own rental companies - probably the best way for them to recoup some money on them at the mo.

Original poster
fishnet · 17/03/2009 23:04

Can I just say that you don't have to be an idiot to have an interest only mortgage. For some people an interest only mortgage is a more sensible option. A repayment mortgage is not great if you are intending to move again in the near future. The payments are of course front loaded with interest and so at the beginning you are paying off very little capital.

We had an interest only mortgage and made overpayments on the mortgage. We could overpay whatever we could afford in any particular month and in the two years of having the mortgage we paid off £50k whihc is far more than we'd have paid off with a repayment mortgage. By doing this we saved ourselves a fortune in interest.

Th eonly foolish ones are those who take out an interest only mortgage for the maximum they can possibly afford in repayment terms and never make any provision for paying off the capital.

Phew - off my chest - continue

OP posts:
NotAnOtter · 17/03/2009 23:12

where we live prices are falling but people are too smug and tight to drop them..

what will happen is that as NO ONE want to make a loss or end up in negative equity - then people will sit tight

my street has 8 houses on it

1 has full scaffold

2 have skips

2 had a house full of builders on Sunday - what's all that about?

the lack of people moving will mean that there is more demand for the few houses going on.....no???

as an aside

The CE of Bradford and bingly lives opposite our primary School...I saw photographers taking lots of lovely pics of his house today - wonde if He is selling?