Interest only mortages and overpaying?

CloudCuckooLand

james, I agree with the start of your first post about IO for disciplined types, Repayment for those without self-control. But then you seem to be trying to get a square peg into a round hole..."you do need to only spend what you can afford" whilst at the same time "some people need/use expensive borrowing".

Those with discipline will tend to be the ones with emergency funds, pre-Xmas savings, etc etc. So not the type, by the very virtue of their self-controlled character, to splurge on the credit card...so pretty unlikely to ever need the flexibility.

Meantime those who do run up more expensive borrowing and might need some flexibility are exactly the sort of people who should not be allowed on IO, because they will fail to stick to the payment plan (from day one often) in good times, let alone wait for an emergency...and once they have stopped their overpaying are likely to find it hard to discipline themselves to restart, precisely because of their character trait of having no self-control.

As many people are incapable of honesty about their spending habits, erring on the side of most on Repayment, with just a few with repayment vehicles on IO (who might overpay if they choose and keep the repayment vehicle for themselves after the term), is the safe option overall, for both the individuals and the industry as a whole in light of the credit crunch, imo.

Totally agree with the need for some to rethink their entire need for a mortgage.