So the solution to houses becoming unaffordable for first time buyers is to remove protections against unscrupulous lending that led directly to the 2007 financial crisis. That sounds about right for this government…
_2008 flashbacks_
So the idea is that there are two limits:
– You can borrow up to 4.5x your salary (minus any debts and deductions for dependents and so on)
– You can borrow the amount you asked for but you have to survive 8% APR without being destituted
The 4.5x rule typically caught people out before the 8% rule. Very few people failed the 8% rule.
Banks will still have to demonstrate that their customers can pay in stress test scenarios. This will be based on the whole mortgage “book” rather than on individual cases.
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So the solution to houses becoming unaffordable for first time buyers is to remove protections against unscrupulous lending that led directly to the 2007 financial crisis. That sounds about right for this government…
_2008 flashbacks_
So the idea is that there are two limits:
– You can borrow up to 4.5x your salary (minus any debts and deductions for dependents and so on)
– You can borrow the amount you asked for but you have to survive 8% APR without being destituted
The 4.5x rule typically caught people out before the 8% rule. Very few people failed the 8% rule.
Banks will still have to demonstrate that their customers can pay in stress test scenarios. This will be based on the whole mortgage “book” rather than on individual cases.