How can genuine affordability tests be a bad thing?
People love to bash the banks.
Lend too much to joe public = banks fault because those poor sods don't have the brain power to think about what they can afford and should have had the bank advising them better.
Affordability tests = bad thing. You are stopping joe public being able to buy a house because you are not lending them enough.
Charging a fee= bad thing. Thought you were a charity and lending money out of the goodness of your hearts.
Don't get me wrong, banks have done many bad things, and are being held to account for it quite rightly. Affordability tests are not one of those bad things though.
depends on how they quantify "affordability". The new MMR guidelines are a joke if that is what the banks are now following. As an advisor I previously was able to say to a client " so & so bank will lend 4x income, so you can borrow xxx" Now, all the lenders do is ask you to fill in an affordability calculator - adding in outgoings such as council tax, utility bills, transport costs etc.....all for a property that you haven't moved into and wont know these figures. On asking a lender what to put in they either say "guess" or more commonly they will have it already pre-populated based on the average for that type of dwelling. Also, woebetide you if you have children - this will severely go against you in the affordability stakes as they expect you to be paying ££££ for nursery fees, childcare costs, afterschool tuition etc etc. I recently had a client who could show months & months of bank statements showing her quite frugal outgoings but was turned down by 4 lenders saying that as she had 3 kids she could only afford £150k even though her income was around £50k pa......totally ignoring the fact her husband did not work and was a househusband,
I genuinely think what you have posted is all very positive. When I bought my first house I never properly considered all the bills that came along. Making people think about these, even if you can't be exact, has got to be a good thing. In fact, as an advisor I would expect you to talk people through their affordability in more detail than simply 'I can get you 4x salary'.
As for borrowing 150K on a salary of £50K with kids, this sounds about right to me.
How can genuine affordability tests be a bad thing?
People love to bash the banks.
Lend too much to joe public = banks fault because those poor sods don't have the brain power to think about what they can afford and should have had the bank advising them better.
Affordability tests = bad thing. You are stopping joe public being able to buy a house because you are not lending them enough.
Charging a fee= bad thing. Thought you were a charity and lending money out of the goodness of your hearts.
Don't get me wrong, banks have done many bad things, and are being held to account for it quite rightly. Affordability tests are not one of those bad things though.
depends on how they quantify "affordability". The new MMR guidelines are a joke if that is what the banks are now following. As an advisor I previously was able to say to a client " so & so bank will lend 4x income, so you can borrow xxx" Now, all the lenders do is ask you to fill in an affordability calculator - adding in outgoings such as council tax, utility bills, transport costs etc.....all for a property that you haven't moved into and wont know these figures. On asking a lender what to put in they either say "guess" or more commonly they will have it already pre-populated based on the average for that type of dwelling. Also, woebetide you if you have children - this will severely go against you in the affordability stakes as they expect you to be paying ££££ for nursery fees, childcare costs, afterschool tuition etc etc. I recently had a client who could show months & months of bank statements showing her quite frugal outgoings but was turned down by 4 lenders saying that as she had 3 kids she could only afford £150k even though her income was around £50k pa......totally ignoring the fact her husband did not work and was a househusband,
I genuinely think what you have posted is all very positive. When I bought my first house I never properly considered all the bills that came along. Making people think about these, even if you can't be exact, has got to be a good thing. In fact, as an advisor I would expect you to talk people through their affordability in more detail than simply 'I can get you 4x salary'.
As for borrowing 150K on a salary of £50K with kids, this sounds about right to me.
hmmmm - even with a 25% deposit, that makes a purchase price of £200k. I'm not sure where you live but have you tried buying a 3 bed house in the south east for £200k ??? Maybe a 2-bed flat but that's about it.
But that surely is just evidence of a ridiculously over heated property market continually flamed and fuelled by successive governments who can't allow it to falter.
The UK economy is entirely dependent on its property market and that is an exceedingly concerning dynamic.
I have friends who have just bought round the corner from me, £420K for a house. They did it before affordability rules came in, and budget £50 per week for all the food for a 4 person household, absolutely nothing for any holidays etc. it's madness and the market should have been allowed to properly correct in the last recession rather than being propped up by the government.
Sadly, affordability in London for either buying, but also increasingly, renting, is becoming a pipe dream for so many young people and it is a disaster waiting to happen.
Since July 2007 I would hazard a guess that property prices in London are up between 50-100% despite the worst global crises since the '40's and the fact that real wages have reduced! Simply unsustainable.
If affordability rules stop people over paying then, whilst individually that is sad for those affected, the end result may just be worthwhile. Strangely I suspect that a strengthening in the £ exchange rate may do more to dampen the real estate market!
Comments
As for borrowing 150K on a salary of £50K with kids, this sounds about right to me.
hmmmm - even with a 25% deposit, that makes a purchase price of £200k. I'm not sure where you live but have you tried buying a 3 bed house in the south east for £200k ??? Maybe a 2-bed flat but that's about it.
The UK economy is entirely dependent on its property market and that is an exceedingly concerning dynamic.
I have friends who have just bought round the corner from me, £420K for a house. They did it before affordability rules came in, and budget £50 per week for all the food for a 4 person household, absolutely nothing for any holidays etc. it's madness and the market should have been allowed to properly correct in the last recession rather than being propped up by the government.
Sadly, affordability in London for either buying, but also increasingly, renting, is becoming a pipe dream for so many young people and it is a disaster waiting to happen.
Since July 2007 I would hazard a guess that property prices in London are up between 50-100% despite the worst global crises since the '40's and the fact that real wages have reduced! Simply unsustainable.
If affordability rules stop people over paying then, whilst individually that is sad for those affected, the end result may just be worthwhile. Strangely I suspect that a strengthening in the £ exchange rate may do more to dampen the real estate market!