Lloyds/Halifax Reduce Income Multiples from 5x to 4x.....

[Sarnie]

.......on loans over £500k, primarily to quell the London market.

http://money.uk.msn.com/news/lloyds-sets-up-loan-t...

Thought this might interest some of you on here given house crazy the London market is at the moment. This has come totally out of the blue and what usually happens is that when one institution makes a huge change like this, most others follow suit shortly after.......

[Cupramax]

Yeah, that'll really stop Arabs and Russians spending their millions, it'll just stop the locals

[Gio G]

Is that 4 x joint income? How does that now work?

Thanks G

[Sarnie]

Gio G said:

Is that 4 x joint income? How does that now work?

Thanks G

It's always been joint income....

[Timmy40]

That's going to hit a much much wider section of the market than just London, there are an awful lot of properties outside of London over £500k. If they wanted to target London they could have made it postcode specific.

[Sarnie]

Timmy40 said:

That's going to hit a much much wider section of the market than just London, there are an awful lot of properties outside of London over £500k. If they wanted to target London they could have made it postcode specific.

The vast majority of mortgage applications over £500k are for properties in and around London....

[Timmy40]

Sarnie said:

Timmy40 said:

That's going to hit a much much wider section of the market than just London, there are an awful lot of properties outside of London over £500k. If they wanted to target London they could have made it postcode specific.

The vast majority of mortgage applications over £500k are for properties in and around London....

Do you have some stats for that? Just interested to see a figure. Is it really that dominant? I'd just be quite surprised as I live in a rural area, over 120 miles from London in a not very expensive area ( nationally speaking ) and most family sized houses are well over £500k+.

[jdw1234]

Timmy40 said:

Sarnie said:

Timmy40 said:

That's going to hit a much much wider section of the market than just London, there are an awful lot of properties outside of London over £500k. If they wanted to target London they could have made it postcode specific.

The vast majority of mortgage applications over £500k are for properties in and around London....

Do you have some stats for that? Just interested to see a figure. Is it really that dominant? I'd just be quite surprised as I live in a rural area, over 120 miles from London in a not very expensive area ( nationally speaking ) and most family sized houses are well over £500k+.

Timmy40 - Its mortgage size over £500k not property value.

[Timmy40]

jdw1234 said:

Timmy40 said:

Sarnie said:

Timmy40 said:

That's going to hit a much much wider section of the market than just London, there are an awful lot of properties outside of London over £500k. If they wanted to target London they could have made it postcode specific.

The vast majority of mortgage applications over £500k are for properties in and around London....

Do you have some stats for that? Just interested to see a figure. Is it really that dominant? I'd just be quite surprised as I live in a rural area, over 120 miles from London in a not very expensive area ( nationally speaking ) and most family sized houses are well over £500k+.

Timmy40 - Its mortgage size over £500k not property value.

Yeah I know, I did wonder whether in London it's a combination of high property values and alot of young professionals who have good incomes but not yet built up much equity.

In which case the new proposals are a great way to lock young professionals out of the housing market so that they can pay rentals to wealthy foreign buyers who will step in to take up the slack.

[vescaegg]

Timmy40 said:

jdw1234 said:

Timmy40 said:

Sarnie said:

Timmy40 said:

That's going to hit a much much wider section of the market than just London, there are an awful lot of properties outside of London over £500k. If they wanted to target London they could have made it postcode specific.

The vast majority of mortgage applications over £500k are for properties in and around London....

Do you have some stats for that? Just interested to see a figure. Is it really that dominant? I'd just be quite surprised as I live in a rural area, over 120 miles from London in a not very expensive area ( nationally speaking ) and most family sized houses are well over £500k+.

Timmy40 - Its mortgage size over £500k not property value.

Yeah I know, I did wonder whether in London it's a combination of high property values and alot of young professionals who have good incomes but not yet built up much equity.

In which case the new proposals are a great way to lock young professionals out of the housing market so that they can pay rentals to wealthy foreign buyers who will step in to take up the slack.

Shouldnt this be limiting to 4x for mortgages under £500k?

Surely those people borrowing under £500k are the most at risk of defaulting because lets face it, people who can get a mortgage of half a million quid are way more likely to be better off, in highly professional jobs and less at risk of being unemployed for any length of time.

Will this really affect the everyday purchaser?

[Timmy40]

vescaegg said:

Surely those people borrowing under £500k are the most at risk of defaulting because lets face it, people who can get a mortgage of half a million quid are way more likely to be better off, in highly professional jobs and less at risk of being unemployed for any length of time.

Will this really affect the everyday purchaser?

Totally agree, see my post further up, a couple taking home £6k a month with a £2.5k mortgage have far more room for manouvere than a couple taking home £3k a month with a £1.5k mortgage.

Alot of people buying together will have been used to renting. Two people who were both paying £1200 a month rent ( bugger all in London ) buying together with a £500k 30year mortgage of 4% would be paying the same mortgage as they were rental, but obviously be getting the security of owning there own place.

A youngish couple in London both earning around £50k a year is pretty standard in the professions, they would be taking home £6k a month combined it's not exactly outragous is it.

Limiting them to a £400k mortgage just forces them to remain in the rental market longer. Nice for the landlords!!!

[Sarnie]

Timmy40 said:

Do you have some stats for that? Just interested to see a figure. Is it really that dominant? I'd just be quite surprised as I live in a rural area, over 120 miles from London in a not very expensive area ( nationally speaking ) and most family sized houses are well over £500k+.

I personally don't have stats for it other than all our companies £500k+ mortgage transaction have mainly been in London/SE with one or two from around the UK.

I'm sure Halifax's own stats reflect this also, hence them enforcing this criteria change which is actually applicable UK wide, but specifically stating it's quell the London market.

[BrabusMog]

When you're young, getting on the property ladder in London is extremely difficult. Let's take a couple I know as an example. Between them they are making £90k absolute tops, they have saved up/been gifted a total amount of £50k for a deposit and want to buy a place where they can start a family in Clapham. x5 and they might just be able to get something, x4 means a total of £410k which isn't going to go a long way. So they will get caught in the trap of renting for years to come until they both earn enough to buy a place unless they get an unexpected windfall.

Whilst it is a fair point to say not to over-extend yourself etc, the London market is insane, there are ex council flats in Battersea going for eye-watering sums of money.

[Sarnie]

BrabusMog said:

When you're young, getting on the property ladder in London is extremely difficult. Let's take a couple I know as an example. Between them they are making £90k absolute tops, they have saved up/been gifted a total amount of £50k for a deposit and want to buy a place where they can start a family in Clapham. x5 and they might just be able to get something, x4 means a total of £410k which isn't going to go a long way. So they will get caught in the trap of renting for years to come until they both earn enough to buy a place unless they get an unexpected windfall.

Whilst it is a fair point to say not to over-extend yourself etc, the London market is insane, there are ex council flats in Battersea going for eye-watering sums of money.

But the clients in your example would still be able to borrow 5x income as they are not borrowing over £500k.........

[jdw1234]

Timmy40 said:

Totally agree, see my post further up, a couple taking home £6k a month with a £2.5k mortgage have far more room for manouvere than a couple taking home £3k a month with a £1.5k mortgage.

Alot of people buying together will have been used to renting. Two people who were both paying £1200 a month rent ( bugger all in London ) buying together with a £500k 30year mortgage of 4% would be paying the same mortgage as they were rental, but obviously be getting the security of owning there own place.

A youngish couple in London both earning around £50k a year is pretty standard in the professions, they would be taking home £6k a month combined it's not exactly outragous is it.

Limiting them to a £400k mortgage just forces them to remain in the rental market longer. Nice for the landlords!!!

Or prices will fall?

Also, I didn't think you can get interest only mortagges anymore.

A £500k, 25 year repayment mortgage would be £3,534 per month (at 7% which is what the affordability checks are tested on).

[jdw1234]

BrabusMog said:

When you're young, getting on the property ladder in London is extremely difficult. Let's take a couple I know as an example. Between them they are making £90k absolute tops, they have saved up/been gifted a total amount of £50k for a deposit and want to buy a place where they can start a family in Clapham. x5 and they might just be able to get something, x4 means a total of £410k which isn't going to go a long way. So they will get caught in the trap of renting for years to come until they both earn enough to buy a place unless they get an unexpected windfall.

Whilst it is a fair point to say not to over-extend yourself etc, the London market is insane, there are ex council flats in Battersea going for eye-watering sums of money.

Or prices will fall to meet the demand at x4? (Chinese/Russian/Arabs aside).

[BrabusMog]

Sarnie said:

BrabusMog said:

When you're young, getting on the property ladder in London is extremely difficult. Let's take a couple I know as an example. Between them they are making £90k absolute tops, they have saved up/been gifted a total amount of £50k for a deposit and want to buy a place where they can start a family in Clapham. x5 and they might just be able to get something, x4 means a total of £410k which isn't going to go a long way. So they will get caught in the trap of renting for years to come until they both earn enough to buy a place unless they get an unexpected windfall.

Whilst it is a fair point to say not to over-extend yourself etc, the London market is insane, there are ex council flats in Battersea going for eye-watering sums of money.

But the clients in your example would still be able to borrow 5x income as they are not borrowing over £500k.........

Good point! Still, you're unlikely to get a house for under £550k.

[JQ]

BrabusMog said:

When you're young, getting on the property ladder in London is extremely difficult. Let's take a couple I know as an example. Between them they are making £90k absolute tops, they have saved up/been gifted a total amount of £50k for a deposit and want to buy a place where they can start a family in Clapham. x5 and they might just be able to get something, x4 means a total of £410k which isn't going to go a long way. So they will get caught in the trap of renting for years to come until they both earn enough to buy a place unless they get an unexpected windfall.

Whilst it is a fair point to say not to over-extend yourself etc, the London market is insane, there are ex council flats in Battersea going for eye-watering sums of money.

Surely the solution is not to live in Clapham or Battersea. I'd like to live in a 6 bed detached in Alderley Edge, but I can't afford it, so I don't. Tell them to set their aspirations to meet their finances and I'm sure they'll find a place. However, if you're saying you can't get a place in the whole of London for less than £500k, then fair enough, I don't know London house prices.

My first house was in a less than desirable location, but that's because it's all I could afford. I did a load of work to it and made a fair chunk of equity that enabled me to move to a nicer location, and so on. It seems these days young people just want to move straight into the trendiest, most affluent areas from day 1, certainly the impression I get from the graduates in my office.

[Timmy40]

jdw1234 said:

Or prices will fall?

Also, I didn't think you can get interest only mortagges anymore.

A £500k, 25 year repayment mortgage would be £3,534 per month (at 7% which is what the affordability checks are tested on).

1 - I doubt it, foreign buyers and pensioners switching from annuities to property will just expand the rental market.

2 - The quoted mortgage wasn't I/O it was repayment, 30y, 4%.

3 - Even £3500 would leave the theoretical couple with £2500 spare, so on an affordability basis not a problem.

[Sarnie]

Timmy40 said:

1 - I doubt it, foreign buyers and pensioners switching from annuities to property will just expand the rental market.

2 - The quoted mortgage wasn't I/O it was repayment, 30y, 4%.

3 - Even £3500 would leave the theoretical couple with £2500 spare, so on an affordability basis not a problem.

Lenders obviously can't do anything about foreign cash buyers, but they can affect the spending capacity of people requiring mortgages.....

Personally, I can see the logic, but not sure it should have been rolled out across the entire LTV categories.

£800k at 90% LTV is a different risk proposition to £800k at 50% LTV for example.....