End to Interest Only Mortgages????

lostinrates

vivatifosi wrote: »

I'm really in two minds with regard to IO mortgages. Having had one attached to an endowment, I know from personal experience how seeming prudence can lead to getting your fingers burned like pobby. I am also wary about people who buy houses on IO and mortgage themselves to the hilt because there's no plan B. However both lir and Michael have made very reasoned arguments as to where they work. Help! I just don't know...

here's the thing: it works...short term, or with anothe rplan in place. If you have no other savings, repayment, or its a longterm, or timed plan, it doesn't work, especially if heavily leveraged. The house I rfer to, is, IMO, over valued. I guess its more than they paid at peak: they've done stuff there, a lot of good stuff, but a lot of stuff they did planning to live there until removed in a wooden box, stuff very few people want to pay for.

I'd almost like to buy it to help them: I liked them hugely: I can see how we could have been them. I felt deep, deep compasion....

lostinrates

misskool wrote: »

Prices are regulated by supply and demand. Where more people want to stay, house prices are higher. It's not rocket science. If people are willing to work hard and pay for their house, it's their choice.

within reason. There always has been some limit to borrowing hasn't there?

tommy75

Bit late for the FSA. All just hot air trying to justify why their being paid. At what point is it too late for the IMF to come in and stop Gordon Brown or has that point already been and gone?

Thrugelmir

julieq wrote: »

There is no such thing as an interest only loan anyway. There are loans which charge interest only during the term and require a repayment of the whole amount at the end. It's frankly no-ones business but the lender and the borrower whether they use one of these loans, but it's hardly risky. Over 25 years there is more chance of seagulls nesting on the moon than negative HPI, so there is no risk to the lender. There is no risk to the borrower either since they will have paid less over that period than rental of an equivalent house given modest assumptions on rental increases and inflation.

If you borrow money but do make any capital repayments or either have a vehicle or alternative means of discharging the capital balance at the end of the mortgage term then a loan is interest only.

Whether the lender is covered by the equity in the property totally misses the point of why the FSA is looking at then closely.

As house prices rose in the period 1999 onwards. Progressively more and more people choose interest only mortgages due to affordability of property at the lower end of the market or a desire to accelerate higher up the property ladder than they otherwise would have been possible.

The question the FSA has asked is. Have these borrowers now, in the the current econmic climate overextended themselves. Many are in positions of low / negative equity. They are therefore unable to remortgage. So are sitting on their lenders SVR hoping that rates do not increase in the near future. Despite some lenders having low SVRS. The market average is actually 4.64%.

Lenders may well be asked in the future to protect their borrowers. Not everyone is financially astute and human nature dictates that many will always borrow as much as they can.

The risk to the borrower is that they lose their home. Which isn't just the mortgage repayments. But the capital spent on purchase, the personalisation of the property etc. The disruption and stress caused to a family in difficulty should be minimised for the benefit of everyone by affording a degree of protection. HPI is fine, but houses are homes not investments for the majority.

Interest only formed a large part of the self certified income mortgage market as well. So this is an issue which will take some years to unwind.

Thrugelmir

lostinrates wrote: »

within reason. There always has been some limit to borrowing hasn't there?

Not more recently.

lostinrates

Thrugelmir wrote: »

Not more recently.

Thing is, even feeling how I do...I want some of that reckless, unlimited lending.

Thrugelmir

julieq wrote: »

Anyone with an endowment policy based mortgage now has an asset worth many many times the purchase price of their house given HPI since endowments were available, and a shortfall which is probably less than a couple of percent of that value. It's hardly an issue to anyone.

£5k to £20k is a lot of money to many householders in the current economic climate. The net result is that many will continue to repay there mortgages beyond the standard 25 year term, potentially into their retirement. So easy to be dismissive and ignore the realities of how this is going to effect many people.

chucky

Thrugelmir wrote: »

If you borrow money but do make any capital repayments or either have a vehicle or alternative means of discharging the capital balance at the end of the mortgage term then a loan is interest only.

extremely unlikely and virtually impossible that an interest only mortgage being more than the value of a property. it will be very small mortgage outstanding.

actually forget impossible - it's never happened and will never happened.

fc123

lostinrates wrote: »

I'd almost like to buy it to help them: I liked them hugely: I can see how we could have been them. I felt deep, deep compasion....

That's nice of you LIR but pls don't buy it for those reasons:D. Buy it if it suits you, is the right price and is what you want...then it's just an add on bonus if selling it helps them out.

Why not make an offer of what you feel it's worth? Based on the added bits not really adding the extra £££ that they want?. They can only say no.

lostinrates

fc123 wrote: »

That's nice of you LIR but pls don't buy it for those reasons:D. Buy it if it suits you, is the right price and is what you want...then it's just an add on bonus if selling it helps them out.

Why not make an offer of what you feel it's worth? Based on the added bits not really adding the extra £££ that they want?. They can only say no.

Oh yes, I wouldn't do it based on that: I dpn't want to be in a simialr position in a couple of years!

We'll think on it. As you know, would be a big shift for us. DH isn't sold on it (though he flt heart broken for them too, but...) and its a decision we both make....or not...or continue to dither.



If it were a stable/more positve market and they accept an offer we felt was appropriate I think its the kind of place we could sit in and save: but the thing is, if its NOT ll joy in the future, I think DH is right....we'd out grw it within a couple of years.