The five-times salary mortgage by Finance News Bulletin

Published: 24/05/07

Prospective homeowners are being offered mortgages of up to five era their joint salary by a high-street bank targeting first-time buyersThis unprecedented present comes from Abbey, the UK's second largest house loans provider This increased borrowing power comes as a review reveals that more first-time buyers are getting priced out of the marketThe standard lending level is three and semi times a client's salary

Abbey's offer is set to trigger a wave of alike deals from banks and mortgage brokersAn Abbey spokesmen said: 'Lending five times salary may sound far above the ground but really is something we have to do given what is happening with home prices'Under Abbey's new offer, a couple borrowing £300,000 at 6% over 25 existence, with a shared annual profits of £60,000 would face repayments of more than £1,900 a month - £23,000 a yearBut while the trend has caused concern among brokers, who terror new borrowers may struggle to meet repayments in the future, some lesser lenders have already been offering higher manifold mortgages than Abbey

This is Money and monetary Mail reported back in July how Morgan Stanley was offering couples six times their combined salaries, despite the fact that they may have defaulted on debts in the history And last week, Bank of Ireland Mortgages and Bristol & West greater than before the amount they would lend to borrowers from four era salary to four and a halfRoyal Bank of Scotland and Cheltenham & Gloucester are also eager to loan at five-times salary But the offer is only made to the correct customers - those with a high income, large deposit and a spotless credit history

Some lenders go even higher - Northern astound said its maximum loan was 59 times salary, but added that it hardly ever allows borrowers to stretch that farAbbey sought to clarify their place this afternoon They said the present would only be available to couples who could pay a 3% put and had a joint income of £60,000

Nick Gardner, director at Chase De Vere Mortgage organization, said: 'It is quite possible that if people borrow the maximum they can get away with, they will be overstretching themselves'It may only take one or two rate rises to put such a squeeze on their finances and they can no longer make trimmings meet' The Bank of England is expected to raise interest rates by 025 proportion points to 5% next week

The chief decision-making of the Consumer praise Counselling Service, Malcolm Hurlston, said Abbey's announcement could create a risky situation for borrowersMr Hurlston said: 'For some populace this is going to look similar to an answer to their prayers, but it risks taking them into dangerous country If their salaries do not go up in the way they believe, then they are going to be very stretched'Abbey said that only borrowers with physically powerful credit records and low levels of other debt would qualify

The high street store has also tranquil other borrowing criteria such as the level of money deposits required and the criteria for mortgage approvals that do not require evidence of incomeIn reaction to Abbey's move, Melanie Bien, associate director at independent mortgage broker, Savills confidential Finance: 'It is unprecedented for a mortgage lender to offer this much on a joint basis It seems lenders are leaving all out to enable first-time buyers to borrow as much as they can'A survey conducted by Abbey and in print this week found that over 17 million people in the UK are unable to increase a foothold on the property steps or were choosing not to try

The main reason given for this was a lack of funds and a terror of over committing finances to the propertyNici Audham Gardiner, mortgage manufactured goods executive at Abbey, said: 'Strangely, despite hundreds of different mortgages obtainable to buyers, our research shows that 12% of non-homeowners believe that they would be on the property ladder if they could just find the right mortgage'We have made changes to our Abbey mortgage proposal to help more people, especially first time buyers, purchase the home they desire'Financial advisers advocate that borrowers' monthly repayments should not exceed more than 40% of their take-home disburse

(Do your sums here)It comes down to affordability Different people decide to spend their wages in dissimilar ways If someone wants to borrow more and have a larger mortgage then as long as they are aware of their overall monetary position then they should be free to make that choiceSome people swallow, some people burn, some people have large families/lavish holidays - they spend a lot of money per annum on that which others might not and thus more able to afford a higher mortgage - hence there is certainly a place for higher lending multiples

Consumers must be able to create informed decisions based on their circumstances and be responsibleThis is a totally unintelligent and irresponsible thing to do and it's about time the government stepped in to discontinue it It's partly the fault of mortgage lenders that accommodation prices keep on rising by offering to lend more and more cash with most populace now living on a knife edge of debt and bankruptcy They are of course only acting in their own interests to keep their lenders in a much debt with them as possible for the longest distance end to end of time

Actually, Cliff of London a 43% increase borrowing eqates to much more than a 43% increase in risk

At the finish of the day, it's the populace who over extend themselves that are to responsibility not the banks/brokers Banks are in place to make profits and so put on't want the risk of a default themselves One key query people should ask themselves before they think about borrowing to buy is why do they have to get on the property ladder in the first put (compared to what their current position is) and is that purpose/reason realistically achieavable and value the riskThis market has been driven by excessive levels of money owing and gearing, which may have incredible effects on the way up, but will be equally disasterous on the way down

Of course we have endless Estate Agents, television personalities and mortgage banks telling us to jump on the housing ladder as almost immediately as possible, just as they did in the not on time 80'sBut anyone with a little sense can see that it makes considerably more sense to rent property, and go away the foolishness to those who don't pay attention to the warnings from the Bank of EnglandThis has been a global boom, but now it's rotating to bust Prices are now lessening fast in America, drops are start in Sydney,Dublin,France,Spain,South Africa, Bulgaria and others

This equates to an add to of 43% Borrowers should note that taking on 43% more debt also income taking on 43% more risk To see the impact of borrowing more than you can comfortably afford, take a seem at today's insolvency and bankruptcy figures, or the repossession figures of the early Ninetiesextreme mortgage lending and the enormous rise in property prices are creating the potential for a tragedy on a massive scale

Anyone in their 30s, 40s and above will know only too well that the good times don't keep rolling on everlastingly The longer the good times go on the bigger the argue when it finishs And it will finish eventually Are people aware of what happened to possessions prices in Japan when the fizz burst in the 1980/90s

They fell but upto 95% You have been warnedSelect a loan term 12 months (1 year) 24 months (2 existence 36 months (3 existence 48 months (4 existence 60 months (5 existence 72 months (6 existence 84 months (7 existence 96 months (8 existence 108 months (9 years) 120 months (10 years)Please choose a type of insurance Life insurance house and contents Car Breakdown services physical condition - medical physical condition - dental Travel Pet -

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