How bad can the UK mortgage market become?
Came across this article:
https://www.efinancialcareers.co.uk/news/2023/07/…
Interesting read that the top earners are live beyond their means and now some may face higher mortgage payments.
Do bankers / senior high finance professionals actually live beyond their means?
If your lifestyle was set 2 years ago so that you used a meaningful part of your bonus to pay for expenses (and not save it), then it’s an issue. Potentially a real one
If i take my own example, at 6% rate a refi of my mortgage would bump monthly payment by >£1000.
That’s 12k after tax, meaning 24k before tax. And my mortgage is far from a million.
On a million, you can double that number easy. And double it again if the mortgage was interest only instead of repayment.
An MD that makes 1 m a year probably has a base of 250-300k. If bonus evaporates, it gets tough.
Roughly:
1m bonus was probably 300k deferred, 700 pre tax / 350 post tax
If that million becomes 500, probably only have 175 after tax left
If you’re already living on on that bonus, and you have 175k less cash year on year, and in parallel your cash expenses increase by 100k, there is a real squeeze.
Second this.
What about senior members in PE or Portfolio Managers at HFs / AMs? Would they be a similar position, assuming they didnt buy the house straight up with cash lol?
Do most senior banking professionals live in Zone 1; Kensington, Chelsea etc; hence their 7-8 digit mortgage.
IPs working at HFs don't really buy houses with mortgage given the volatility in income
From all the PMs ive worked with, most of them pay outright in cash. Small minority do mortgage but only do so when they have atleast 1.25x mortgage amount in liquid cash
Usually no one owns a house at a hf unless theyve made a lot of money (so successful PM for a couple years) or they have a partner who earns quite a bit of money and can support full mortgage in case they get canned. Renting is the way to go for majority
The volatility is also why most IPs at HFs struggle with any large fixed family costs (private schools etc)
seniors at PE firms are a lot more secure, given they have a guaranteed base + bonus structure (carry isnt really needed for a mortgage)
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