Lloyds TSB blocks interest only mortgage switch

howler_2

huntersc wrote: »

And thanks goodness for that.

When I was little my mum borrowed money for Christmas, every year without fail. She'd then spend the year trying to pay it back. When the banks stopped lending to her she'd borrow from the guy that came around the estate with his stack of £20 notes offering money for a tiny interest rate of 40%.

I don't think she ever bought anything with money she actually had. The result? A life spent worrying about where the next meal would come from. She ended up getting depression and my parent's marriage failed.

She's not stupid but she got swallowed up in this world of buying things you cannot afford. My poor little sister has gone the same way, she has a good £20k on credit cards, she doesn't care. It's normal to her.

A friend of mine, we worked at the same company, he bought a DB4, 1958 model I think. Paid £300k for it. At the same time has a little pad in the Warf, bought it for £1.5m. He still borrows money from me. Doesn't have a penny in real money to his name. But he does have a number of credit cards and most weekends you'll find him in Boujais or the Sanderson paying £25 for a drink. All on credit.

The difference between him and my mum? Not very much. Neither have any concept of buying things they can afford.

The sooner that people like my friend and my mum are unable to fund their lives on credit the better. ne one hand these people need to be protected from themselves. On the other we need a change in attitude. A change in our economic belief system.

Do I think it will happen? Not a chance. But I do hope that this recent crisis changes people's attitudes a little. I also hope that regulation comes into force to stop things like interest only mortgages.

Very well put. It's the change in attitude I'm hoping for, but the realist in me doubts how much of this will happen - especially with Brown and Darling borrowing like there's no tomorrow and telling the country this is how you deal with a recession

adr0ck

i think your missing the point missmoneypenny

if you lose your job and therefore can not afford to repay all your mortgage until you find a new job of similar income you will need to be working in a bar or whatever to keep going until you do get on your feet again

allowing people to only repay the interest only part of the mortgage for a few months is one way of doing this

MissMoneypenny

adr0ck wrote: »

i think your missing the point missmoneypenny

if you lose your job and therefore can not afford to repay all your mortgage until you find a new job of similar income you will need to be working in a bar or whatever to keep going until you do get on your feet again

I was never talking about people losing their job adr0ck. I was talking about the op where the example given was trying to find the extra £46 per week to meet the their increased mortgage payments.

huntersc

MissMoneypenny wrote: »

If they need more money, then why can't they work on Satrurday or Sundays too? Who told you life was going to be easy?

Parents are responsible for their own childrens wellbeing. It is the parents job to support their children.

I think you're being a little simplistic here. I agree with your main point about credit and I certainly agree that people shouldn't be scared of a bit of hard work to keep themselves afloat.

However you're ignoring many many factors, it's not quite as easy as you make it out to be.

E.g, who looks after the kids on the Saturday and Sunday? Grandparents a long way away, single mum, what does she do? After paying childcare costs (extra on weekends) she might be lucky to earn an extra £3.

You talk about protecting children, looking after their welfare, but that often equates to being there with them and for them, not leaving them 7 days a week. Children need nurturing, need parental guidance so it's not always as easy as telling someone to get an extra job. In many cases the child is better off poor and with it's parents than with a little more money but all alone.

Blanket statements are unhelpful and I do think that £46 is a LOT of money for some people to find a week. Suggesting people just go out and get a job is a little insensitive and ignores the fact that every situation is different.

andys15

MissMoneypenny wrote: »

Why do you think that an adult doing a paper round is so bad? You seem to see it as a childs job and something that an adult should not have to do. It's a stress free job.

Because it is not going to happen. A retired guy who wants a few pints in the pub on a saturday, yes I have seen them deliver papers. I dot even know how much paper boys get these days but I dont think it will be the difference between an interest only or repayment mortgage.

neverdespairgirl

Ian_Griffiths_Halifax wrote: »

in 19 years of being in the basis I've not had a single client go to repossession. I feel that this may change soon though.

WOuld you necessarily know if a client had been repossessed?

MissMoneypenny

huntersc wrote: »

E.g, who looks after the kids on the Saturday and Sunday? Grandparents a long way away, single mum, what does she do? After paying childcare costs (extra on weekends) she might be lucky to earn an extra £3.

One of our weekly papers is delivered by a mother and her two young children. The mother makes a game of it and the children take turns to push the papers through the doors.

huntersc wrote: »

Blanket statements are unhelpful and I do think that £46 is a LOT of money for some people to find a week. Suggesting people just go out and get a job is a little insensitive and ignores the fact that every situation is different.

I was brought up in a different time and perhaps that is why I find it so hard to understand why some people can't get extra money by doing a second job. Or if they have childcare to consider, by doing a job at home in the evening, like taking in ironing. We don't start off by thinking we will have to do this, but things change and we have to move with the times.

One thing I do know, things are defiantly going to be changing.

Ian_Griffiths_Halifax

huntersc wrote: »

I can't comment on your situation specifically, I don't have all the information at hand.

Interest only mortgages are a way for people to get themselves in a lot of bother. Let's say you lost your job or even became too ill to work. You can no longer pay the mortgage. You would have the same problem if you were on a Repayment Mortgage House prices haven't risen enough to offset the money still owed, voila, you can't sell the house, you don't have enough equity for a loan, the bank aren't willing to help because you've only ever paid the interest. Makes no difference whether you have been on Interest Only or Repayment in the past as to whether a lender is willing to help You're in big trouble.

The point about interest only mortgages is that they are taken out by people that are speculating on the market, who cannot afford the full mortgage. Or know that they have an exit strategy in place such as pay rises, a single person eventually having a partner moving in, pension lump sum from work, inheritance, emigration and selling the property, make overpayments through flexible facilities within the mortgage etc etc etc.

The principle behind the interest only mortgage is exactly what we as a country need to get away from. People, for example, should not be allowed to only pay off interest on their credit cards. I would agree that this facility (without a repayment vehicle) has assisted with HPI as people were able to afford a bigger mortgage, and so more expensive property, for the same monthly payment as a Repayment Mortgage.

If someone takes a loan then there needs to be a defined repayment period. Or exit strategy!

It pains me to think that you are a mortgage adviser and promote interest only mortgages. I do hope you only offer them in very very specific circumstances to people that have an awful lot of money because in my opinion, mortgage 'consultants' that promoted the idea of getting an interest only mortgage when someone couldn't afford a full repayment have a lot to answer for. It's simply not ethical and bad advice in most situations. So you think I'm unethical! I was one of the first Mortgage Brokers in the Country and not had one single reposession. I've not had a single complaint (conplaints are different to winges and gripes and all brokers/consultants/advisers get them at some time) regardless of who regulated mortgages at that time. Of course I don't recommend Interest Only mortgages in many circumstances, only when it is obvious that there is absolutely minimal risk to the client! Such as the client who I got who couldn't afford a Repayment Mortgage on the house he wanted to buy but could easily afford an Interest Only Mortgage. We went for Interest Only when I found that he wanted to get a mortgage (not expensive, only in the £125k region) and had a 'normal' job, but was an only child with a multi, multi millionaire father. He simply didn't want to be financially dependent on his father for income. An extreme case, I know, but there are often good reasons to be on Interest Only.

I remember my first ever mortgage, I asked about this notion of interest only and my adviser looked at me like I was an idiot. You would have got the same reaction years earlier if you'd have asked for a Repayment Mortgage and would have been sold and Endowment because they were going to pay out a small fortune on top of paying off your mortgage. Fortunately he was being paid by my company to advise me and thus had no vested interest. He made the point very well that interest only was a way to get into a lot of trouble.

I do think that the country would be in a much more positive position right now if interest only was illegal. Totally not necessary I believe that interest only will be seen the same way as endowments, miss-sold, badly advised and ultimately ending in repossession How can more end up in Repossession than Repayment Mortgages? The payments would be lower! .

The fact that people in this country think that paying off only the interest on a loan is acceptable explains a lot about the position we are in.

There simply needs to be the correct risk assessment on the case. Stopping them completely is not the answer.

MissMoneypenny

andys15 wrote: »

Because it is not going to happen. A retired guy who wants a few pints in the pub on a saturday, yes I have seen them deliver papers.

That's a lifestyle choice. Or he could work in the pub, get paid and get his drinks bought for him.

andys15 wrote: »

I dot even know how much paper boys get these days but I dont think it will be the difference between an interest only or repayment mortgage.

A couple of paper rounds should be enough to make up the £46 mortgage rise I was talking about. Or a bar job if they like pubs.

When I did the ironing for the bill money, I felt like it put me back in control of my life.

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Ian_Griffiths_Halifax wrote: »

There simply needs to be the correct risk assessment on the case. Stopping them completely is not the answer.

I think the correct risk assessment when purchasing a house is as close to zero risk as possible, which means no interest only mortgage without proof of how you mean to pay it back, 3.5x single, 2.5x joint income, minimum of 10% deposit.

I believe the sorry state we are now entering with the economy would have been almost completely avoided if these simple steps had been the law.

Just how hard is it for the politicians to have got their heads round this, it really is childs' play, how could they have got something so simple, so wrong.