Getting a mortgage in 1975 and how it changed by 2003.
This explains how lending practices have changed over the past 30 years or so.
In 1975
The broker makes an assessment of the earnings of the couple, asks for evidence of income and savings, offers a loan that is 2.5 times the earnings of the first earner in the household (as the expectation is that the couple may want to start a family sometime), and specifies that the loan be repayable over 25 years and covers 80% of the cost of the property to be purchased. The application needs to be considered in the office and a reply will be given in a few weeks.
In 2003
The demeanour of the broker is somewhat different. He takes the earnings of the couple at face value, indicates that a x4 multiple of their joint earnings (£50,000) would be normal practice but given that the property they are seeking to buy is priced at £250,000 he encourages them to ‘self-certify’ (i.e. overstate) their incomes so as to ‘tick the boxes’ enabling him to offer x5 of their current joint incomes over a long but unstated period. The ‘paperwork’ will not be a problem.
After the interview Linda introduces a sensible note of caution about their future ability to repay, especially if they have children, but this is swept aside by John’s optimism based partly on the notion that house prices will always increase.
In 2008
They are in trouble and the mortgage broker is not around any more.
These changes in lending practices have been replicated literally millions of times in the last three decades and explain why so many borrowers now face defaulting and possibly repossession – they also partly explain the increasing dependence on paid childcare.This explains how lending practices have changed over the past 30 years or so.
In 1975
The broker makes an assessment of the earnings of the couple, asks for evidence of income and savings, offers a loan that is 2.5 times the earnings of the first earner in the household (as the expectation is that the couple may want to start a family sometime), and specifies that the loan be repayable over 25 years and covers 80% of the cost of the property to be purchased. The application needs to be considered in the office and a reply will be given in a few weeks.
In 2003
The demeanour of the broker is somewhat different. He takes the earnings of the couple at face value, indicates that a x4 multiple of their joint earnings (£50,000) would be normal practice but given that the property they are seeking to buy is priced at £250,000 he encourages them to ‘self-certify’ (i.e. overstate) their incomes so as to ‘tick the boxes’ enabling him to offer x5 of their current joint incomes over a long but unstated period. The ‘paperwork’ will not be a problem.
After the interview Linda introduces a sensible note of caution about their future ability to repay, especially if they have children, but this is swept aside by John’s optimism based partly on the notion that house prices will always increase.
In 2008
They are in trouble and the mortgage broker is not around any more.
These changes in lending practices have been replicated literally millions of times in the last three decades and explain why so many borrowers now face defaulting and possibly repossession – they also partly explain the increasing dependence on paid childcare.
Professor Peter Ambrose BA, AKC, MA, D.Phil, FRSA Visiting Professor in Housing Studies Health and Social Policy Research Centre Brighton University Friend of London Citizens Associate of the Zacchaeus 2000 Trust
Links: Profile of Peter Ambrose Urban Process and Power Article on Affordable Housing
Housing Affordability Standard - April 2008 (2,454 KB)
Professor Ambrose works with the Zacchaeus 2000 Trust and their principles are as follows:
We will combat poverty, and related ill health and educational underachievement;
We will promote the improvement of living and working conditions on the basis of economic and social justice in pursuit of a society that is fully inclusive of people of every race, colour and creed through the provision of evidence based policy alternatives to government.
We will pursue policies that are rooted in the experiences of the disadvantaged and excluded people of the United Kingdom, and the work of NGOs among them. They will be designed to reform the structures that create those conditions.
We oppose discrimination and inequality, both between men and women and between generations.
Aware of the pressures placed on the national economy and society by the globalised free market we will promote an economy in the United Kingdom aiming to generate the conditions of full employment in which all can share the financial burdens and opportunities of a democratic nation.
We will operate without allegiance to any political party while promoting, vigorously, policies that are consistent with this statement of principles to all political parties and to the government of the day.
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