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  • FIRST POST
    • MSE Megan F
    • By MSE Megan F 30th Jan 18, 3:37 PM
    • 238Posts
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    MSE Megan F
    MSE News: Interest-only mortgage warning
    • #1
    • 30th Jan 18, 3:37 PM
    MSE News: Interest-only mortgage warning 30th Jan 18 at 3:37 PM
    Many of the 1.67 million homeowners with an interest-only mortgage could be at risk of losing their homes if they struggle to repay their balance at the end of their mortgage, the Financial Conduct Authority has warned...
    Read the full story:
    'If you've got an interest-only mortgage you need to check your repayment plan now'

    Click reply below to discuss. If you haven’t already, join the forum to reply.
    Read the latest MSE News
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Page 2
    • Pixie5740
    • By Pixie5740 2nd Feb 18, 11:34 AM
    • 11,693 Posts
    • 16,448 Thanks
    Pixie5740
    My mum used to work for one of the UK's largest mortgage lenders during the 90's and 00's. Frequently she would have people applying for mortgages, who had taken financial advice, and the repayment vehicle was them putting £50 a month into a cash ISA. Basic arithmetic tells you that even after 25 years that's going to be nowhere near enough to cover the outstanding capital.

    That's not to say there is anything wrong with interest only mortgages it's more a case of user error. However, lenders have to comply with regulations to try and protect the lowest common denominator from themselves.
    • poppy10
    • By poppy10 4th Feb 18, 9:26 PM
    • 5,919 Posts
    • 7,162 Thanks
    poppy10
    I do not understand, more people rent than have IO mortgages and yet those with the IO mortgages who almost certainly have some equity are a problem and the renters with no equity are fine.

    Can someone explain it to me?
    Originally posted by michaels
    Renters know that they have no security of tenure, and expect and plan to move on at some point.

    Many "homeowners" on IO mortgages with no repayment vehicle have just been burying their heads in the sand. They really can't see themselves getting kicked out of a house they have lived in for 25 years.
    Signature changed by MSE ForumTeam
    • Thrugelmir
    • By Thrugelmir 4th Feb 18, 10:17 PM
    • 57,535 Posts
    • 50,828 Thanks
    Thrugelmir
    I do not understand, more people rent than have IO mortgages and yet those with the IO mortgages who almost certainly have some equity are a problem and the renters with no equity are fine.
    Originally posted by michaels
    Liars loans etc. Underwriting standards were extremely poor in the run up to the GFC by certain lenders. Was well discussed at the time. HBOS paid Paul Moore to keep quiet. Interesting guy to listen too if you ever get the chance. Record low interest rates has simply deferred the problem.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • michaels
    • By michaels 5th Feb 18, 8:51 AM
    • 20,417 Posts
    • 94,174 Thanks
    michaels
    Liars loans etc. Underwriting standards were extremely poor in the run up to the GFC by certain lenders. Was well discussed at the time. HBOS paid Paul Moore to keep quiet. Interesting guy to listen too if you ever get the chance. Record low interest rates has simply deferred the problem.
    Originally posted by Thrugelmir
    Even with no equity, they have probably been renting from the bank cheaper than they would have rented the same property from a landlord.
    Cool heads and compromise
    • sammyjammy
    • By sammyjammy 5th Feb 18, 8:54 AM
    • 4,260 Posts
    • 4,617 Thanks
    sammyjammy
    I did read it.

    But I don't see why that will stop claims companies charging a large advance fee for their services. They know there are many suckers out there.
    Originally posted by zx81
    and plenty of borrowers looking to blame someone else for their poor financial planning....
    "You've been reading SOS when it's just your clock reading 5:05 "
    • Onlooker
    • By Onlooker 8th Feb 18, 4:12 PM
    • 19 Posts
    • 6 Thanks
    Onlooker
    Think Twice
    The alternatives to paying of an interest mortgage are going to be difficult to find.One market place to try to avoid getting into is the Equity Release /Lifetime Mortgage situation.This alternative has to be closely looked at,especially from the point of what reduction will be made to the future value of your estate.
    • MissMoneypenny
    • By MissMoneypenny 8th Feb 18, 6:17 PM
    • 5,175 Posts
    • 8,425 Thanks
    MissMoneypenny
    Safe to assume that many borrowers simply have no plans. Slowly rising interest rates aren't going to help either. As will reduce the opportunity to pay down capital.
    Originally posted by Thrugelmir
    And now the Bank of England have just said that might not be as slow as first thought.

    they said rates would need to rise "earlier" and by a "somewhat greater extent" than they thought at their last review in November.

    Economists think the next rate rise could come as soon as May.
    http://www.bbc.co.uk/news/business-42986729


    How soon before the mortgage lenders follow?

    The BBC mortgage calculator site used to have a warning that rates rise and as a guide would also give their monthly repayments at 10% interest.

    The IOs were OK if people used the low interest rates to overpay their mortgage/pay off their mortgage early.
    Last edited by MissMoneypenny; 08-02-2018 at 6:22 PM.
    RENTING? Have you checked to see that your landlord has permission from their mortgage lender to rent the property? If not, you could be thrown out with very little notice.
    Read the sticky on the House Buying, Renting & Selling board.


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