Apparently demand is down – no, deposits of £43,750 are unaffordable!
According to a Sky News report this morning, demand for houses is down.
I find this incredibly hard to believe as all I hear is people talking about wanting to get a house instead of renting due to tenancy restrictions, uncertainty of their landlord paying the mortgage and just generally wanting to own what should largely be an appreciable asset.
However, with banks requiring ludicrous deposits of anything from 25% upwards it is going to be some time before Joe Average can get out of rental tyrany.
This is of course, good news for landlords who want to be lax in their responsibilities – I mean, where are there tenants going to go? With deposit scams still going on, landlords claiming destruction of property for putting a drawing pin in the wall in order to retain deposits and very obvious landlord cartells forming in areas to monopolise the rental and housing benefit market it’s doom and gloom but not for demand.
What does this mean to most people then? Ok, so you want to get onto the property ladder – first of all, it seems you’ll need a full-time job nowadays – so if you’re self-employed like me and don’t have an accountant – you can forget it as self-certification mortgages are gone.
Right, full-time job – what’s one of those? With an almost certain 1.6million people about to lose their jobs and not many being created, i’m sure that lenders will impose a “you must have been in this job for over 6 months” clause to allow them to say no. Worse, what about people who do 2 or more part-time jobs? In some cases, the net income is more than one full-time job – oh but no, you’re not going to qualify still because lenders – oh, sorry, I mean lenders computer systems (because that’s what you’re really applying to) can’t cope with multiple income sources – so they just spit out a “no” decision.
So, lets say that you have a full-time job, next big one is deposit. Banks have soared the deposit level from 5% to 25% (and in some cases 30%) in the last 2 years – it cost me 20% to get my property and that nearly actually killed me with the stress (hospitalised due to heart stoppage). You’re looking at a property with a value of £175,000 (as long as you live outside of London that is!) that means that you’ll need a deposit of …… wait for it…… oh yes, £43,750!!!!!!
You’ve got a full-time job, you’ve cobbled together the deposit, what about income multiples – naturally your annual salary won’t cover the loan part in one go (unless you’re a footballer!) so you’ll need income multiples to support the loan application – you live in the North West – your income is likely to be about £18,000.
In the old days if you were buying, you could get a loan for 3.5 times your annual salary as some wierd calculation figured out that this would leave enough residual income after mortgage to be able to live off.
Let me do the math: £18,000 x 3.5 = £63,000 – hmmm, i’m some £112,000 short here – even though i’m giving £43k to the bank – the multiples system is still based on the property value, not the loan value.
Even if you have a partner, you don’t get 3.5 times there salary on a joint mortgage!
Some of these are national average figures only it varies from region to region but not by much – the housing boom affected the whole of the UK proportionally but salaries didn’t increase with the same gusto – just banks decided to allow 10x income multipliers and 120% mortgages – sorry but anyone who did take those deals and is now up the creek without the paddle should have looked at it better and at least mustered 5% deposit.
What’s really going on here?
There’s a conspiracy theory that basically the banks just simply don’t want to do mortgages any more – that can’t really be right because if you look at it, property is all banks ever really lend money on – businesses don’t get loans – they get “on-demand-recallable-overdrafts” – but more on that some other time.
Foreign investors are soaking up every empty derelict property they can barter the price down on, doing them up to the bare minimum and then advertising it to housing benefit tenants because they know it’s a sure thing payment for the most part.
Private landlords are wanting to attain £650 per month on properties but impose restrictions such as No DSS, No Kids, No Smokers, No Lodgers and god help you if you want to make the place feel like a home with a picture or two!
So it’s not demand that’s down – no way, it’s simply that the government, the city and the banks have allowed house prices to soar to a point where both purchase and mortgage servicability are not viable.
This is one time when we can say without reservation that it’s the screwed up world of the city fat cat and the pay-offs that go on behind closed doors to look the other way and the one-rule-for-one and one-rule-for-everyone-else attitude that’s put this country, it’s natural residents, it’s jobs and it’s housing market in total jeopardy.
As a final note, the chancellor, George Osborne, recently announced a huge bunch of cuts in public spending and complained about a £186bn deficit – I can solve part of the problem – shut down the foreign aid budget for a bit! We’re in a state where we can’t be giving the money away so they’ll just have to go to countries like France (who shovel most of the illegal immigrants through the tunnel at us anyway) and get if from them for a few years.
Britain should be closed for outside lending and concentrate it’s efforts on encouraging businesses to start and medium sized ones to grow, to take control of it’s financial industry and actually punish the people responsible for the problems with some tough jail time and stop the soaring utility bills by re-nationalising the electric, gas and water industries because next to the nuclear launch codes – the price for a unit of electricity is the most closely guarded secret which requires a password to obtain – your postcode!