Limiting mortgages to income multiples of three or less would have a dramatic effect on house prices. Currently, well over a third of new mortgages have income multiples of greater than three. At least 10 percent have multiples of four or more (mostly to single buyers).
The FSA's plans to limit income multiples would make it much harder for housing bubbles to form in the future. Since mortgage availability would be linked to incomes, house prices would also be anchored by borrower's capacity to repay.
Limiting income multiples could be the first good idea that the FSA has produced.