Mortgages

[sobrique]

On the radio this morning was a news article about how Abbey National are relaxing their limit on how much money you can borrow on a mortgage.

BBC Link.
Summary? Abbey have said 'ok, you can borrow 5x your salary, rather than the traditional 3.5x'.

There was a little bit of froth from someone who was saying that this was bad, because now people would be looking at 200-250 thousand pound houses. Now, I'm not sure about anyone else, but I always thought that 40-50 grand a year was a quite well above average salary.

Now, I've just had a look at house prices around coventry: http://www.upmystreet.com/property/prices/l/Coventry.html

What that one says is that Average price of a house in coventry in the first half of 2006 was 147 thousand. With a detached averaging at 304 thousand, and a flat at 117 thousand.

A 3.5x mortage means you need to be earning 33,000 a year to afford an 'average flat'. Even a 5x requires 23 thousand pounds a year. I seem to recall that's quite a way above an 'average salary', although I'll admit I've not actually checked recently. Is it only me who thinks that 'average salary' should be able to afford an 'average house'?

There's actually a nice graph at the bottom of that BBC article, that's saying currently 'average house price' is actually 6.1x 'average salary'.

Of course, lets not even start on how much pain is involved in a 5x mortgage over a 25 year term. Rough guessing at rates suggests that it'll be about half of take home pay. 5% rate, 147k, 25 years is about £850 out of a £29,400 salary, of which you'd actually see about £1600-1700, so around half.

Personally I think upping the cap isn't all that bad an idea. Quite a few people were using the 'self assessment' deals to lie anyway. Of course, it also means that there will be a swathe more people able to buy into the property market too, which will probably serve to spike prices even further.

Comments

[sebbo.livejournal.com]

saw it, wanted to blog, and obvioulsy you had already picked up on it :)

I was somewhat ... disconcerted for the same reasons Syriel was mentioning. Spending seems more important to people than saving and debts are taken to be a norm and not taken as seriously as they should be. I'm not sure people realise how much it actually costs them and only look at what they can afford... or seem to be able to afford.

5x morgages... bah. The way the housing market is going one may need to consider to become a house building apprentice, work the industry for a couple of years, build your own house, then move back to your old profession :)

Given the situation i'm in, i'm also hoping the market will crash badly. Its the only way to get there.

Furthremore this whole house owning culture is very much a british thing. At least a few years ago when i looked at it british house ownership was comparatively high, something to do with gov policy a few decades ago to encourage ownership. So maybe the expectations this has built are not realistic anymore in the current circumstances? House ownership is certainly moving into the maybe direction from the definately direction, though this may just be temporary.

[sobrique.livejournal.com]

I have just taken out a car loan, so I can well appreciate that. The burden of debt in this country is gradually getting nuts. The problem being any steps to take to 'mediate' get a large fraction immediately going 'wahey bigger loan' and borrowing more for the extra hundred pounds a month more debt they can service.

I want to buy a house. It's getting close to being in reach, but still not _quite_ there yet. I am starting to understanding the 'married for financial reasons' comment that I could never understand as a child.

[feanelwa.livejournal.com]

I think expectations of house ownership are so common in the UK because the renting market is so unreasonable - landlords getting away with renting out houses with leaky single glazed windows that don't lock and no insulation, a semi-working bath and no shower, etc etc, for giant rents because they've figured out if everybody's charging ridiculous amounts, we have no choice but to pay it. That makes me more angry than never being able to own a house, to be honest - I'm single and always will be, and I have the good sense to know how to keep warm and mend things, but there will always be people who are stupider and have more dependents whose lives can be made truly pathetic by house owners' lust for more money.