Mortgages At Up To Five Times Salary
Abbey have announced that they will start offering mortgages of up to five times annual salary to certain qualified people. The requirements are that you should earn over £50,000 year and have a 25% deposit.
This raises all sorts of questions. Will people ever be able to pay off their mortgages? Remember that the banks are quite happy if you don’t just so long as you can keep paying them interest.
What will this do to house prices? Abbey say that this is a response to the very high level of house prices but house prices have always been relative to what people can afford to borrow. If mortgage lenders were to reduce the multiple of salary borrowing limits then house prices would fall. House prices have only risen so fast in recent years because of the actions of the lenders in making money more freely available.
Where will people at the lower end of the scale be following this announcement? They will find it even more difficult to buy a house. They will not be able to borrow on these terms and house prices will move even further beyond their reach.
So, my predictions for the long term effects of this move? House prices will increase in the short term. More people will get themselves into a life controlled by their debts. House prices will fall in the medium term as the buyers at the bottom find they can’t afford to buy causing a glut of lower end properties.
All in all this seems to be a move for the banks to make more money at the expense of those people who struggle to get a foot on the housing ladder.
No doubt other mortgage suppliers will follow Abbey’s lead and lead us all in to financial disaster in the future.
Related posts:
- The End of 125% Mortgages
- FSA Has Put Pressure On Banks And Financial Institutions To Stop Increasing Exit Fees On Mortgages
- Paying Mortgages With Credit Cards
- Nationwide To Offer 25 Year Fixed Rate Mortgages
- House Price Rises
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