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sobriqueOn 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.
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.
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no subject
Date: 2006-11-01 01:39 pm (UTC)1. They're only offering this on a income of over £50,000, and with a 25% deposit.
2. First time buyers are not buying average price houses.
3. This is nothing new. Abbey are, however, the first large bank to offer it publically and officially.
Basically, the whole thing is arse, based on entirely unreasonable expectation of home ownership early in life. Historically many, many more people rented than do today. People who did buy houses tended to do it later in life and buy smaller places than young FTBs are today.