This may not be the way leverage works

5% deposit mortgage: ‘It will give my little girl security’

Security might not be quite the way to describe 19 to one leverage on the financing of a variable price asset.

7 thoughts on “This may not be the way leverage works”

  1. I know that not building enough is a huge problem, but it’s also about the multiples on both incomes.

    If you’re a couple earning £20K each (which ain’t huge money), you can get 5x each nowadays. So, £200K of borrowing. If you’re single with the same income, you get half of that. It’s why a lot of Generation Rent stories are single people. Back in the 80s and 90s, the second income barely counted. Lots of single people could afford houses.

  2. Random brit peasant in Spain

    Govt seem determined to push house prices to the moon. Curiosity is why? If I were being generous I wonder about trying to avoid a consumer confidence driven recession from a fall in house prices, the cynic in me thinks it’s rather an attempt to stoke inflation to escape (at least some of) the debt. Seems they will succeed at least in asset inflation. What proportion of UK debt out there is index-linked these days?

  3. @BoM4: Back in the late 70s when I first bought the multipliers were 2.5 * first salary + 1.0 * second.

  4. AtC…

    Not only that, my building society issued only 6 mortgages per month – you had to wait your turn.

  5. @Random brit peasant in Spain. From another Brit peasant in Spain.

    I see it as the greatest, longest running Ponzi scheme of all time (Maybe the state pension marginally trumps it)
    Whilst house prices rise, house owners feel good & governments get elected. It will eventually end. There will be one almighty crash

  6. We scrimped and saved to put down a 10% cash deposit, it got us over a “price break” point, valuable in the days of 15% base rates. Kids today with their half-a-percent base rates, don’t know they’re born.

    29 years later and I’m about six years away from paying off my 25-year mortgage, and only have 110% of it left to pay.

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