Will The FSA Make a Milestone Announcement Tomorrow?
17 March 2009, 02:20 PM
#1
Scooby Regular
Thread Starter
Join Date: Jun 2008
Posts: 5,559
Likes: 0
Received 0 Likes
on
0 Posts
Will The FSA Make a Milestone Announcement Tomorrow?
There is speculation that the Financial Services Authority (FSA) will tomorrow announce a cap on mortgage lending of more than three times a borrower's income.
And, a ban on 100% Mortgages.
Obviously, the Mortgage Lenders and Brokers are up in arms about it ...... well, they should have lent more carefully and we wouldn't be in this mess!
Clearly, if it happens and is rigourously enforced, it will affect the price of starter homes ....... I guess 'average' house prices will have to equal 3 times the 'average' income? Or is that too simplistic?
And, a ban on 100% Mortgages.
Obviously, the Mortgage Lenders and Brokers are up in arms about it ...... well, they should have lent more carefully and we wouldn't be in this mess!
Clearly, if it happens and is rigourously enforced, it will affect the price of starter homes ....... I guess 'average' house prices will have to equal 3 times the 'average' income? Or is that too simplistic?
17 March 2009, 02:25 PM
#2
Scooby Regular
Join Date: May 2005
Location: Here, There, Everywhere
Posts: 10,619
Likes: 0
Received 0 Likes
on
0 Posts
Lets hope this is true.
I took out "3.5 x my wage" when I bought my flat. Think this is a sensible amount to borrow.
Like you say, at 3 or 3.5 x wage, we wouldn't be in this mess now.
EDIT
However this will not happen. The Government will not allow this, as house prices will crash overnight. They want banks to lend more money. House price rises mean more money for the Government, as has been the way til the bubble burst. The Government just want to put a sticky plaster over the hole, and re-inflate the bubble again.
I took out "3.5 x my wage" when I bought my flat. Think this is a sensible amount to borrow.
Like you say, at 3 or 3.5 x wage, we wouldn't be in this mess now.
EDIT
However this will not happen. The Government will not allow this, as house prices will crash overnight. They want banks to lend more money. House price rises mean more money for the Government, as has been the way til the bubble burst. The Government just want to put a sticky plaster over the hole, and re-inflate the bubble again.
Last edited by stilover; 17 March 2009 at 02:28 PM.
17 March 2009, 02:26 PM
#3
Scooby Regular
Join Date: Aug 2001
Location: Warrington
Posts: 4,554
Likes: 0
Received 0 Likes
on
0 Posts
Far too simplistic. People will have saved a deposit, have equity from the rise in value of existing property, have an inheritance or have won on the premium bonds. All that cash is added onto the available mortgage to give the house price they can afford.
Then consider couples where both work etc. and regional variations.
Average house prices will always way exceed average incomes.
Then consider couples where both work etc. and regional variations.
Average house prices will always way exceed average incomes.
17 March 2009, 02:30 PM
#4
Scooby Regular
Thread Starter
Join Date: Jun 2008
Posts: 5,559
Likes: 0
Received 0 Likes
on
0 Posts
Point taken .... the long term multiple is 4 I think .... it is only over the past few years where people could borrow whatever they liked - AND DID!
I would praise the move as a good thing - it would give some security and a sensible lending level.
I would praise the move as a good thing - it would give some security and a sensible lending level.
17 March 2009, 02:37 PM
#5
Scooby Regular
Thread Starter
Join Date: Jun 2008
Posts: 5,559
Likes: 0
Received 0 Likes
on
0 Posts
The Association of Estate Agents say:-
"For many first time buyers on salaries under £20,000, the capping of a loan at three times their annual salary will mean that there is little chance they could get onto the property ladder - prices would have to fall even lower for them to be able to afford a look in"
Who cares if prices fall so they can afford to buy?
Low prices are good for everyone ......
"For many first time buyers on salaries under £20,000, the capping of a loan at three times their annual salary will mean that there is little chance they could get onto the property ladder - prices would have to fall even lower for them to be able to afford a look in"
Who cares if prices fall so they can afford to buy?
Low prices are good for everyone ......
17 March 2009, 02:44 PM
#6
Scooby Regular
Join Date: Sep 2001
Location: A big town with sh1t shops: Northampton
Posts: 21,366
Likes: 0
Received 0 Likes
on
0 Posts
Yeah, but most people buy houses with someone else, so 2 x £20K incomes seems more reasonable.
I would be lucky to afford a shoe box on my salary (public sector), but luckily my husband has a job too
I would be lucky to afford a shoe box on my salary (public sector), but luckily my husband has a job too
17 March 2009, 02:56 PM
#7
Scooby Regular
iTrader: (6)
Join Date: Apr 2005
Location: Stroke it baby!
Posts: 33,828
Likes: 0
Received 0 Likes
on
0 Posts
[quote=SunnySideUp;8582388]The Association of Estate Agents say:-
"For many first time buyers on salaries under £20,000, the capping of a loan at three times their annual salary will mean that there is little chance they could get onto the property ladder - prices would have to fall even lower for them to be able to afford a look in"
Who cares if prices fall so they can afford to buy?
Low prices are good for everyone ......[/quote]
Not everyone.
"For many first time buyers on salaries under £20,000, the capping of a loan at three times their annual salary will mean that there is little chance they could get onto the property ladder - prices would have to fall even lower for them to be able to afford a look in"
Who cares if prices fall so they can afford to buy?
Low prices are good for everyone ......[/quote]
Not everyone.
Trending Topics
17 March 2009, 02:59 PM
#8
Scooby Regular
Join Date: Sep 2006
Location: RIP Tam.
Posts: 5,108
Likes: 0
Received 0 Likes
on
0 Posts
was this not mentioned by FM in the housing thread yesterday 
?
Pete recycling is the way to go I see
? Pete recycling is the way to go I see
In response to the 2 replies above.
1. My figure was working forwards, not backwards. 2.3% x 12 = 27.6%. Now it's fair comment to say that the figure for the next 12 months is unknown.
2. Why am I basing my figures on 3.5x salary? Why not? It seems the FSA is going to prevent people borrowing more than 3x there salaries.
Mortgages to be capped at three times salary
08:03 | 16.03.09
Home buyers will be prevented from borrowing more than three times their annual salaries under new mortgage rules to be announced this week.
As part of a wide-ranging package of measures for banking regulation, Lord Turner, the chairman of the Financial Services Authority, will also declare a ban on 100% mortgages.
In all but the most exceptional circumstances, it will become 'normal practice' for loans to be limited to a maximum of three times the borrower’s salary.
Prospective home owners will have to provide a deposit of at least 5%, with many banks and building societies expected to ask for even larger amounts.
The move is in response to Gordon Brown’s request last month that the FSA look into banning risky mortgage lending.
Daily Telegraph
1. My figure was working forwards, not backwards. 2.3% x 12 = 27.6%. Now it's fair comment to say that the figure for the next 12 months is unknown.
2. Why am I basing my figures on 3.5x salary? Why not? It seems the FSA is going to prevent people borrowing more than 3x there salaries.
Mortgages to be capped at three times salary
08:03 | 16.03.09
Home buyers will be prevented from borrowing more than three times their annual salaries under new mortgage rules to be announced this week.
As part of a wide-ranging package of measures for banking regulation, Lord Turner, the chairman of the Financial Services Authority, will also declare a ban on 100% mortgages.
In all but the most exceptional circumstances, it will become 'normal practice' for loans to be limited to a maximum of three times the borrower’s salary.
Prospective home owners will have to provide a deposit of at least 5%, with many banks and building societies expected to ask for even larger amounts.
The move is in response to Gordon Brown’s request last month that the FSA look into banning risky mortgage lending.
Daily Telegraph
17 March 2009, 03:03 PM
#9
Scooby Regular
Join Date: Jan 2004
Posts: 1,300
Likes: 0
Received 0 Likes
on
0 Posts
Debatable i would say.
What good are low house prices if you have no salary to buy them with?What good are low house prices if you are a bankrupt or have had your house repossessed due to arrears?
What good are low house prices for the millions that have bought in the last 3yrs or so and can't remortgage due to NE?
Are people happier now than they were back in summer 07?
What good are low house prices if you have no salary to buy them with?What good are low house prices if you are a bankrupt or have had your house repossessed due to arrears?
What good are low house prices for the millions that have bought in the last 3yrs or so and can't remortgage due to NE?
Are people happier now than they were back in summer 07?
17 March 2009, 03:16 PM
#10
Scooby Regular
Join Date: Aug 2002
Posts: 39,877
Likes: 0
Received 0 Likes
on
0 Posts
There is speculation that the Financial Services Authority (FSA) will tomorrow announce a cap on mortgage lending of more than three times a borrower's income.
And, a ban on 100% Mortgages.
Obviously, the Mortgage Lenders and Brokers are up in arms about it ...... well, they should have lent more carefully and we wouldn't be in this mess!
Clearly, if it happens and is rigourously enforced, it will affect the price of starter homes ....... I guess 'average' house prices will have to equal 3 times the 'average' income? Or is that too simplistic?
And, a ban on 100% Mortgages.
Obviously, the Mortgage Lenders and Brokers are up in arms about it ...... well, they should have lent more carefully and we wouldn't be in this mess!
Clearly, if it happens and is rigourously enforced, it will affect the price of starter homes ....... I guess 'average' house prices will have to equal 3 times the 'average' income? Or is that too simplistic?
Starting a mortgage was always a bit of a squeeze in past times, but eventually it seemed to become easier to cope and to be able to get started in a home of your own-ish was always a big plus.
Les
17 March 2009, 03:22 PM
#11
Scooby Regular
Join Date: Nov 2002
Location: Talk to the hand....
Posts: 13,331
Likes: 0
Received 0 Likes
on
0 Posts
The poster of course knows this, and his speculative post is calculated to put the sh*ts up homeowners who read it without it being based in any way in fact.
Basically just more shameful trolling.
17 March 2009, 03:43 PM
#12
Scooby Regular
iTrader: (1)
Join Date: Jul 2004
Location: There on the stair
Posts: 10,208
Likes: 0
Received 0 Likes
on
0 Posts
Except for the majority who bought property towards the top of the market who would find themselves in negative equity for years to come - probably the rest of their lives.
The poster of course knows this, and his speculative post is calculated to put the sh*ts up homeowners who read it without it being based in any way in fact.
Basically just more shameful trolling.
The poster of course knows this, and his speculative post is calculated to put the sh*ts up homeowners who read it without it being based in any way in fact.
Basically just more shameful trolling.
or here:
FSA could cap mortgages - 17 March 2009
or lots of other places
So I can't see how it is trolling or speculative or designed to upset people.
17 March 2009, 05:04 PM
#13
Scooby Regular
Join Date: Nov 2002
Location: Talk to the hand....
Posts: 13,331
Likes: 0
Received 0 Likes
on
0 Posts
Except that this information is available in todays Telegraph: FSA to cap mortgage borrowing - Telegraph
or here:
FSA could cap mortgages - 17 March 2009
or lots of other places
So I can't see how it is trolling or speculative or designed to upset people.
or here:
FSA could cap mortgages - 17 March 2009
or lots of other places
So I can't see how it is trolling or speculative or designed to upset people.
Romours at present. I think people should wait for things to become fact before they start crowing.
17 March 2009, 05:14 PM
#14
Scooby Regular
iTrader: (1)
Join Date: Jul 2004
Location: There on the stair
Posts: 10,208
Likes: 0
Received 0 Likes
on
0 Posts
Except everything in the paper says it WILL happen. Also, are you saying that people are not allowed to discuss articles that DO speculate as it may be interpreted as trolling?
This would logically extend to not commenting on the pages themselves when the paper allows you to
I genuinely cannot see how commenting upon articles that are freely available in the press can be construed as trolling or panic-mongering.
17 March 2009, 05:39 PM
#15
Scooby Regular
its another example of our "lowest common denominator" society
some people drink to much -- introduce more alcohol control
some people borrow too much -- restrict access to capital
etc etc etc
some people drink to much -- introduce more alcohol control
some people borrow too much -- restrict access to capital
etc etc etc
17 March 2009, 05:49 PM
#16
Scooby Regular
iTrader: (1)
Join Date: Jul 2004
Location: There on the stair
Posts: 10,208
Likes: 0
Received 0 Likes
on
0 Posts
some people eat too much chocolate... tax it
some people speed - lower every speed limit
some people put the 'wrong' recycling out - put cameras in every bin
Hmmm.... good point.
Okay folks, for Gods sake stop w*nking!!! They'll be analysing tissues next!
On a more serious note, a mate sent me this link which makes fascinating if very scary reading:
Reserve Banking - The Market Ticker
it's very well written and manages to explain how this mess comes about in clear language.
17 March 2009, 06:21 PM
#17
Scooby Regular
iTrader: (1)
Join Date: Dec 2006
Location: Central Scotland
Posts: 3,687
Likes: 0
Received 0 Likes
on
0 Posts
Starter homes will equal lower standard though. There is a large housing stock in this country and that will become more prestigeous under this system.
You'll effectively bring in a multi tier society over night.
What would be much better (and solve some social issues and benefit scams) would be to bring back the Mortgage Interest Relief for married couples. Promote marriages, promote couples and encourage people to save together to buy together.
Also banning 100% mortgages is wrong. If you do split up with the mrs you might find yourself in need of a house. Since the assets need to be divided up you'll be very cash poor, even if you do have a good job. Say you earn a good 40k per year but don't have a deposit because it is all on legal fees etc.
You might want a 100% mortgage to get a nice flat near your friends and still in a nice area. Given your salary you could easily afford the repayments but you need to buy furniture etc from scratch so no deposit. In that scenario (actually more common than you'd think) a 100% mortgage is a god send.
Lenders need to be tighter with criteria but a blanket ban is wrong.
5t.
You'll effectively bring in a multi tier society over night.
What would be much better (and solve some social issues and benefit scams) would be to bring back the Mortgage Interest Relief for married couples. Promote marriages, promote couples and encourage people to save together to buy together.
Also banning 100% mortgages is wrong. If you do split up with the mrs you might find yourself in need of a house. Since the assets need to be divided up you'll be very cash poor, even if you do have a good job. Say you earn a good 40k per year but don't have a deposit because it is all on legal fees etc.
You might want a 100% mortgage to get a nice flat near your friends and still in a nice area. Given your salary you could easily afford the repayments but you need to buy furniture etc from scratch so no deposit. In that scenario (actually more common than you'd think) a 100% mortgage is a god send.
Lenders need to be tighter with criteria but a blanket ban is wrong.
5t.
17 March 2009, 06:45 PM
#18
Scooby Regular
Join Date: Nov 2003
Location: riding the crest of a wave ...
Posts: 46,493
Likes: 0
Received 13 Likes
on
12 Posts
Debatable i would say.
What good are low house prices if you have no salary to buy them with?What good are low house prices if you are a bankrupt or have had your house repossessed due to arrears?
What good are low house prices for the millions that have bought in the last 3yrs or so and can't remortgage due to NE?
Are people happier now than they were back in summer 07?
What good are low house prices if you have no salary to buy them with?What good are low house prices if you are a bankrupt or have had your house repossessed due to arrears?
What good are low house prices for the millions that have bought in the last 3yrs or so and can't remortgage due to NE?
Are people happier now than they were back in summer 07?
But broadly id say the above people are irrelevent !
17 March 2009, 07:17 PM
#19
Scooby Regular
Join Date: Jun 2003
Location: use the Marauder's Map to find out.
Posts: 2,041
Likes: 0
Received 0 Likes
on
0 Posts
I think 3 times salary is slightly low; 3.5 times is still affordable (as long as interest rates don't shoot up and salaries lag behind).
Some interesting figures:-
When I bought my first flat in 1979 the mortgage rate was 12% (and all lenders charged the same due to the Building Societies Association cartel) and basic rate income tax was 33%. The salary multiple allowed then was 2.5 times salary.
So someone on £25K pa (I think I was on £4K back then!!) could borrow £62500. I've run some figures through a mortgage calculator website and at 12% over 25 years this would cost £664 per month on a repayment mortgage. BUT - back in 1979 we got tax relief on the interest. This would bring the monthly cost down to about £464.
Today, if you were to borrow an amount at 4% over 25 years with no tax relief on the interest and you wanted a monthly outlay of about £460 you could borrow £85000, or nearly 3.5 times £25K.
I don't remember people shouting 30 years ago about lenders allowing people to borrow too much so if £460 per month on a salary of £25K was affordable back then then surely it is still affordable now?
Some interesting figures:-
When I bought my first flat in 1979 the mortgage rate was 12% (and all lenders charged the same due to the Building Societies Association cartel) and basic rate income tax was 33%. The salary multiple allowed then was 2.5 times salary.
So someone on £25K pa (I think I was on £4K back then!!) could borrow £62500. I've run some figures through a mortgage calculator website and at 12% over 25 years this would cost £664 per month on a repayment mortgage. BUT - back in 1979 we got tax relief on the interest. This would bring the monthly cost down to about £464.
Today, if you were to borrow an amount at 4% over 25 years with no tax relief on the interest and you wanted a monthly outlay of about £460 you could borrow £85000, or nearly 3.5 times £25K.
I don't remember people shouting 30 years ago about lenders allowing people to borrow too much so if £460 per month on a salary of £25K was affordable back then then surely it is still affordable now?
17 March 2009, 07:27 PM
#20
Scooby Regular
Join Date: Oct 2003
Location: Runway two seven right.
Posts: 6,652
Likes: 0
Received 0 Likes
on
0 Posts
I look at house prices like this.
Buy at 150k and pay back maybe 300k over the mortgage term. Or;
Buy at 300k and pay back 750k.
Why do people like giving banks lots of their money?
I'd much rather pay a smaller mortgage and put some cash aside, rather than be mortgaged up to the hilt, and have nothing cash.
17 March 2009, 07:34 PM
#21
Starter homes will equal lower standard though. There is a large housing stock in this country and that will become more prestigeous under this system.
You'll effectively bring in a multi tier society over night.
What would be much better (and solve some social issues and benefit scams) would be to bring back the Mortgage Interest Relief for married couples. Promote marriages, promote couples and encourage people to save together to buy together.
Also banning 100% mortgages is wrong. If you do split up with the mrs you might find yourself in need of a house. Since the assets need to be divided up you'll be very cash poor, even if you do have a good job. Say you earn a good 40k per year but don't have a deposit because it is all on legal fees etc.
You might want a 100% mortgage to get a nice flat near your friends and still in a nice area. Given your salary you could easily afford the repayments but you need to buy furniture etc from scratch so no deposit. In that scenario (actually more common than you'd think) a 100% mortgage is a god send.
Lenders need to be tighter with criteria but a blanket ban is wrong.
5t.
You'll effectively bring in a multi tier society over night.
What would be much better (and solve some social issues and benefit scams) would be to bring back the Mortgage Interest Relief for married couples. Promote marriages, promote couples and encourage people to save together to buy together.
Also banning 100% mortgages is wrong. If you do split up with the mrs you might find yourself in need of a house. Since the assets need to be divided up you'll be very cash poor, even if you do have a good job. Say you earn a good 40k per year but don't have a deposit because it is all on legal fees etc.
You might want a 100% mortgage to get a nice flat near your friends and still in a nice area. Given your salary you could easily afford the repayments but you need to buy furniture etc from scratch so no deposit. In that scenario (actually more common than you'd think) a 100% mortgage is a god send.
Lenders need to be tighter with criteria but a blanket ban is wrong.
5t.
Some good points there 5t .
Have to agree .
17 March 2009, 07:35 PM
#22
Scooby Regular
Join Date: Oct 2003
Location: Runway two seven right.
Posts: 6,652
Likes: 0
Received 0 Likes
on
0 Posts
Debatable i would say.
What good are low house prices if you have no salary to buy them with?What good are low house prices if you are a bankrupt or have had your house repossessed due to arrears?
What good are low house prices for the millions that have bought in the last 3yrs or so and can't remortgage due to NE?
Are people happier now than they were back in summer 07?
What good are low house prices if you have no salary to buy them with?What good are low house prices if you are a bankrupt or have had your house repossessed due to arrears?
What good are low house prices for the millions that have bought in the last 3yrs or so and can't remortgage due to NE?
Are people happier now than they were back in summer 07?
What good are high house prices if you have to spend most if your monthly salary on the mortgage?
Negative equity? Been there done that. Lots of options. Rent it out, sell it and pay the balance bank ( I did, £20k on a 14k salary ) or stay where you are.
Are people happier now than they were back in summer 07?
I don't know. I am. But then my happiness doesn't depend on rising house prices.
For too long houses were treated as cash machines. It's over.
17 March 2009, 07:51 PM
#23
There is still the odd person who buys a place because they want to live there .!!
I am interested in property ,but I am in my house because it has everything I want in a HOME .It costs me far too much in repayments,bills etc etc ,but I am happy as a pig in Shoite .!!!
Ideally I would see it as a place to eat ,sleep only, and not be bothered about the bricks and mortar and I would then live somewhere cheaper and be loaded .
But having said that I would only spend it on cars then !!!
I think a sensible medium needs to be found for the youngsters starting out and 3.5 X salary is where it used to be .
People do tend to not want to wait for things anymore .
I am interested in property ,but I am in my house because it has everything I want in a HOME .It costs me far too much in repayments,bills etc etc ,but I am happy as a pig in Shoite .!!!
Ideally I would see it as a place to eat ,sleep only, and not be bothered about the bricks and mortar and I would then live somewhere cheaper and be loaded .
But having said that I would only spend it on cars then !!!
I think a sensible medium needs to be found for the youngsters starting out and 3.5 X salary is where it used to be .
People do tend to not want to wait for things anymore .
17 March 2009, 08:27 PM
#24
Scooby Regular
Join Date: Nov 2000
Location: 32 cylinders and many cats
Posts: 18,658
Likes: 0
Received 1 Like
on
1 Post
3x the first and 1x the second or 2 1/4x joint was the norm only 10 years ago.
Wife and I were 4 months into our first jobs, earned c.£20k a year each and borrowed £80k. With a small deposit we bought a good quality 3 bed detached bungalow in a nice area.
Nowadays, graduates in the same position could not do this. That is not progress.
Wife and I were 4 months into our first jobs, earned c.£20k a year each and borrowed £80k. With a small deposit we bought a good quality 3 bed detached bungalow in a nice area.
Nowadays, graduates in the same position could not do this. That is not progress.
17 March 2009, 09:15 PM
#25
Scooby Regular
Join Date: Nov 2002
Location: Talk to the hand....
Posts: 13,331
Likes: 0
Received 0 Likes
on
0 Posts
What I'm saying is that the particular poster in question has a lot of 'previous' for posting bad news and generally reveling in the schadenfreude that will inevitably result. It just sticks in my craw that people are so blatantly able to get away with it, and that they even seem to have the support of the powers that be when they do.
17 March 2009, 09:25 PM
#26
Scooby Regular
iTrader: (2)
Join Date: Mar 2001
Location: Swilling coffee at my lab bench
Posts: 9,096
Likes: 0
Received 0 Likes
on
0 Posts
I look at house prices like this.
Buy at 150k and pay back maybe 300k over the mortgage term. Or;
Buy at 300k and pay back 750k.
Why do people like giving banks lots of their money?
I'd much rather pay a smaller mortgage and put some cash aside, rather than be mortgaged up to the hilt, and have nothing cash.
Not all that long ago, Mrs C and I were very glad of the ability to borrow a large salary multiple - it meant we could buy our current place without having to first sell the old one. Having a bit of overlap was great for many reasons, and well worth a few months' interest.
Of course, we actually planned ahead and worked out what it was going to cost, for how long, and how we were going to afford it. Not everyone is, to use a word which has become sickeningly inappropriate, so prudent. But that doesn't mean that the availability of credit is always a bad thing.
Last edited by AndyC_772; 17 March 2009 at 09:26 PM.
17 March 2009, 11:10 PM
#27
Scooby Regular
Join Date: Nov 2003
Location: riding the crest of a wave ...
Posts: 46,493
Likes: 0
Received 13 Likes
on
12 Posts
3x the first and 1x the second or 2 1/4x joint was the norm only 10 years ago.
Wife and I were 4 months into our first jobs, earned c.£20k a year each and borrowed £80k. With a small deposit we bought a good quality 3 bed detached bungalow in a nice area.
Nowadays, graduates in the same position could not do this. That is not progress.
Wife and I were 4 months into our first jobs, earned c.£20k a year each and borrowed £80k. With a small deposit we bought a good quality 3 bed detached bungalow in a nice area.
Nowadays, graduates in the same position could not do this. That is not progress.
also theyll be less graduates possibly,chasing real jobs ...!
18 March 2009, 12:40 AM
#28
Scooby Regular
Join Date: Aug 2001
Location: Warrington
Posts: 4,554
Likes: 0
Received 0 Likes
on
0 Posts
Flightman, interesting maths!
For the same interest rate the proportion of the loan paid back is the same. So if £150k requires a total payback of £300k, then £300k requires £600k, not £750k
Anyway, that's a mortgage rate of about 3%. At 12% the £300k house would cost a total of £5m over a 25 year term
The point is that while house prices were rising then when you eventually downsize, or die, allowing the value to be realised, the real cash you get from the £300k house is twice that from the £150k house. It's tax-free and you haven't had to work for it.
For the same interest rate the proportion of the loan paid back is the same. So if £150k requires a total payback of £300k, then £300k requires £600k, not £750k
Anyway, that's a mortgage rate of about 3%. At 12% the £300k house would cost a total of £5m over a 25 year term
The point is that while house prices were rising then when you eventually downsize, or die, allowing the value to be realised, the real cash you get from the £300k house is twice that from the £150k house. It's tax-free and you haven't had to work for it.
18 March 2009, 12:44 AM
#29
Scooby Regular
Thread Starter
Join Date: Jun 2008
Posts: 5,559
Likes: 0
Received 0 Likes
on
0 Posts
The 3x Salary Cap comes into its own when Interest Rates are at around 8% and higher.
I think the long term average rate is 8%?
There are many people who will be hurt when rates increase later this year to something approaching 8% for mortgages - that's when the sense of a multiple cap reaps benefits.
I think the long term average rate is 8%?
There are many people who will be hurt when rates increase later this year to something approaching 8% for mortgages - that's when the sense of a multiple cap reaps benefits.
18 March 2009, 08:31 AM
#30
Unfortunately, it would appear it is the nature of government to get bigger and more controlling.
I wonder if the recession will encourage them to curtail their activities?
Doubt it somehow.