I very much doubt it's going to put negative equity on anyone from 1995 onwards. I think a more realistic figure would be 2003 area maybe at 2002, as prices in 1995 were still at a low level and even in 2000 there were still low ish. And when you take into account people would have already paid a proportion of the mortgage off.
at last some positive news on housing 3x caps
- Thread starter mattheman
- Start date
I very much doubt it's going to put negative equity on anyone from 1995 onwards. I think a more realistic figure would be 2003 area maybe at 2002, as prices in 1995 were still at a low level and even in 2000 there were still low ish. And when you take into account people would have already paid a proportion of the mortgage off.
Not good, as the cap will massively reduce market values and place a large number of people into negative equity. They will then find it very difficult to move on or remortgage.
Also caps don't take into account circumstances and other out goings. A single person able to buy within walking distance of work can easily afford to get a larger mortgage than someone with a non working partner, two kids, maintenance payments and a loan or two.
Im still doubtful as to whether this was really the problem in the first place - all these toxic debts etc and people being unable to pay... I can't believe it amounts to the amount the banks have been given or have lost.
I don't know anyone who has defaulted on any mortgage payments or any other credit - and the official figures for repossessions etc, whilst higher are nowhere near what they should be to cause the problem we are told exists
Something doesn't add up.
I don't know anyone who has defaulted on any mortgage payments or any other credit - and the official figures for repossessions etc, whilst higher are nowhere near what they should be to cause the problem we are told exists
Something doesn't add up.
Soldato
- Joined
- 5 Aug 2006
- Posts
- 11,428
- Location
- Derbyshire
Having a joint mortgage means the wife/girlfriend cannot give up work to have children (I am not on about matternity leave). Not saying they should, but it is something that needs considering when getting a mortgage.
Tbh, about time. The reason house prices got so high in the first place is a) Banks willing to lend more and more and more to 'help' people onto the ladder b) Too many multiple-property owners because of a.
Nothing is going to not harm at least someone. You could look at the number of people affected since 1995 that will be hurt by this, but you can also look at the amount of crap we'll be saved from, from this day forward.
Nothing is going to not harm at least someone. You could look at the number of people affected since 1995 that will be hurt by this, but you can also look at the amount of crap we'll be saved from, from this day forward.
Suits me to the ground if this happened. I bought my house for £120k and went up to around £200k. If it goes back down to what I paid for it then I couldnt care less so long as I can upgrade to a considerably better house for £200k.
Saved from what. The eternal housing market did not cause the bank collapse.
Why can't the government just leave the market alone? if I can afford a mortgage 5x my salary and understand the risks involved, I should be allowed to get one. What particular problem do the government thing they're solving, and why do they think this is the best way of solving it?
You mean people being desparate to get on the ladder and foolishly borrowing more than they can afford?
You mean people being desparate to get on the ladder and foolishly borrowing more than they can afford?
If no one buys houses, house prices will fall until they start selling. Simple as.
Houses have been overpriced for AGES..
But it will affect Average income people more than anyone else. I doubt house prices would fall in line with 3x rate. Unless this country is screwed and this downturn lasts several years.
I would think are economy would have to fail totally, or that move wiould finish are economy of.
Thought it was 4x?
Last edited:
Whilst that may be true, the housing market has been one of the greatest factors driving the UK's debt culture. For years, it has been cheap and easy to borrow almost as much money as you want. Relatively cheap repayments, even on very large mortgages causes an artificial increase in 'demand' for houses. Coupled with the process used for buying and selling houses, the cheap and easy lending effectively caused a bidding war, in which all the buyers are able to bid more than they would otherwise.
The ever-increasing house price was driven by the continued availability of cheap and easy credit. Once this dried up, the demand (ability to pay the 'going-rate') reduces and the prices fall.
The problem now is that the government wants to 'buy' our way out of the current crisis - stimulate more spending. But the level of borrowing means that people are so heavily in debt, that the only way they can afford to keep buying is to borrow more. Hence the current interest rates, designed to keep the availability of cash as affordable as possible.
The housing market may not have been directly responsible for the current problem. But excessive lending at historically low rates, was only ever going to drive house prices up. Unless you can sustain that level of lending indefinitely, then it was always going to end up in the situation we have now - where people are tied into a large debt and the government is forced to do everything possible to try and create a situation where many thousands of people aren't suddenly in danger of losing their homes.
Last edited:
In 1995, the average house price was £65.6k in the UK (source), so I'll accept I might be a little out, but lets crunch some numbers to be sure.
2008 average wage (source)
Median - £20,801
Mean - £26,020
3 times salary multiplier gives
Median - £62,403
Mean - £78,060
Household income figures (2007, can't find 2008 averages) Source
Average household income - £32,799
2.5 times income multiplier gives = £81,997
Whichever way you slice it, these proposals are going to result in a massive increase in negative equity. The best projection here links to 1998 house price averages, the worst to 1992 levels.
To put this in perspective, market peak was in august 2007 at £201,081. (source)
This policy is insane to implement now, it's truely a case of cutting off a leg to deal with a cold. If capping is a good idea (and I'm not necessarily arguing that it isn't), it should be done when the market has bottomed out, to a level that fits in with the market's equilibrium, not as an attempt to force an equilibrium on the market that's 10-15 years out of date.
Last edited:
And what do you think this would do to are already crippled economy. It's going to cripple it even more. Which is the last thing we want to do.
But you also have to take into account deposits.
The people who maybe could afford more than 3x their salary, but can only get a 3x can now afford to save for a larger deposit. Yes no doubting it slows the market down, due to the time it takes to save the deposit up.
But it should not really affect the house prices In the slightly longer term, to what they would level out to naturally. As the average Joe can either afford a £150,000 house of he can not, he may have to save up a little longer for a larger deposit.
What maybe a better idea would be to have a system where your deposit and your wage are linked, and when both are combined it increases you borrowing power.
Hmm... As a potential first-tiime buyer I'm not sure what to make of this.
On the one hand, it will likely drive down prices. Which is good (for me).
On the other... I'm just not seeing how I can ever afford to buy a house at anywhere near todays prices
When I finish my PhD and start my post-doc position I will be on a little over £28k gross. This would mean that I can only borrow up to around £85k. In order to get a house around here, I will have to save up about £50k... I'm not sure how I can do that really.
On top of that, I would have no trouble paying off a mortgage of four times my salary. After all, right now my rent alone is equivalent to 45% of my monthly income, and I'm managing okay. I don't have expensive tastes. Frankly, I'm a little annoyed that someone would want to legislate my prudence away. Why should I be punished for the misjudgements of others?
But anyway... If house prices drop by another 30% it won't matter either way to me.
On the one hand, it will likely drive down prices. Which is good (for me).
On the other... I'm just not seeing how I can ever afford to buy a house at anywhere near todays prices
When I finish my PhD and start my post-doc position I will be on a little over £28k gross. This would mean that I can only borrow up to around £85k. In order to get a house around here, I will have to save up about £50k... I'm not sure how I can do that really.On top of that, I would have no trouble paying off a mortgage of four times my salary. After all, right now my rent alone is equivalent to 45% of my monthly income, and I'm managing okay. I don't have expensive tastes. Frankly, I'm a little annoyed that someone would want to legislate my prudence away. Why should I be punished for the misjudgements of others?
But anyway... If house prices drop by another 30% it won't matter either way to me.
I have no problem with caps on mortgage multiples, but it has to be realistic, and 3x isn't realistic at the moment. 3.5x-4x would be better, anything above 4x then it's pointless.
People have to learn that you can't just get everything on credit. You have to have a big deposit to buy a house, and you have to be able to afford the payments. Ok the deposits side of things is clearing up now, but prices are still generally too high to be affordable.
People have to learn that you can't just get everything on credit. You have to have a big deposit to buy a house, and you have to be able to afford the payments. Ok the deposits side of things is clearing up now, but prices are still generally too high to be affordable.