From: Daytona 
Newsgroups: uk.finance
Subject: Re: Buying a house right now. How safe?
Date: Thu, 22 Apr 2004 17:35:36 +0100

Bruce Robson  wrote :

>Daytona wrote:
>> 
>> It's a problem with the banks lack of intelligence on lending criteria. Common
>> sense suggests it should be on ability to pay (plus a safety margin on variable
>> rates) which takes account of prevailing interest rates, whereas they currently
>> judge it on the spurious price to incomes ratio.
>> 
>> Daytona
>
>But if banks lent more, then prices would rise as people could afford
>to pay more.

Yes. It's similar to bonds - the price varies according to expected interest
rates. 

The limit would be the interest rate and maximum percentage of income used. eg

£19,500 take home pay
Max. of 60% of take home pay - £11,700
Interest rate used 5.5% (for variable loan)
Gives borrowing of £212,727


Daytona