Is your lender coming after your IO mortgage?

Orpheo

Lloyds Banking Group is to start questioning its homebuyers with interest-only mortgages, every year, about whether or not they will have sufficient funds to pay off their home loan. If the borrower hasn’t got an approved answer such as some sort of regular savings plan in place, Lloyds will try to persuade them to move onto a repayment loan. This includes borrowers with Halifax and Cheltenham & Gloucester.

http://www.citywire.co.uk/money/should-interest-only-homebuyers-be-made-to-switch/a418953?ref=citywire-money-latest-news-list

How long before persuasion becomes enforcement?

Strings

its in the interests of both parties that this occurs, so in the long run it will be a win win for both.
I would suggest that should the morgageen not be able to afford the repayment mortgage then the bank will ask for a staggered amount, ie what they can afford.
Plus the whole regular saving this is bit of a waste of time anyway, as it is not compolosry that you use this money for the mortgage.

JonnyBravo

An approved answer? Gosh. That's some stringent action being taken.

Graham_Devon

What will this acheive?

So Lloyds phone the borrower. Lloyds asks the borrower if they have kept to the terms of the agreement which no one cared about at the time. Borrower cr*ps it so says yes, of course. Lloyds say , oh good, have a nice day.

What can lloyds do about it? They couldn't force anything could they?

Spartacus_Mills

Graham_Devon wrote: »

What will this acheive?

So Lloyds phone the borrower. Lloyds asks the borrower if they have kept to the terms of the agreement which no one cared about at the time. Borrower cr*ps it so says yes, of course. Lloyds say , oh good, have a nice day.

What can lloyds do about it? They couldn't force anything could they?

They could force them to have an investment vehicle tied to the mortgage. My first mortgage was an endowmenr and the policy was tied to it.

Squeaky bum time coming for some

JonnyBravo

Spartacus_Mills wrote: »

They could force them to have an investment vehicle tied to the mortgage. My first mortgage was an endowmenr and the policy was tied to it.

Squeaky bum time coming for some

Same here but that was back in the 90's.

How so on a mortgage already in existence?
More likely to be easy to do for new applicants surely?

Brodiebobs

funny one this we have a lloyds (C and G)interest only mortgage, got a letter on saturday asking about our plans to pay off at end of term, and to call them to switch to repayment if we had nothining in place. I called I/O is £370, they quoted £515 repayment, but were currently overpaying and our standard monthly payment is £550 as well as adhoc payments when we have the spare cash, the last on being £800.
The girl i spoke to was trying to push us onto repayment... even offered to INCREASE mortgage term to make it more "affordable" explained we were already making payments of more than repayment mortgage, and she didnt seem to grasp this... even said our circumstances would be investigated if we didnt switch to repayment!? seems they are trying to enforce it!!!

JonnyBravo

Good luck to them. As has been said, it is inherently sensible. They may find the process far from simple though.
Oh, and there's a good deal of difference from "persuade/cajole/nag/bully" to "enforce"

Graham_Devon

Spartacus_Mills wrote: »

They could force them to have an investment vehicle tied to the mortgage. My first mortgage was an endowmenr and the policy was tied to it.

Squeaky bum time coming for some

Couldn't on a mortgage thats already running and being paid etc, surely?

Can't simply force something onto an agreement.

Brodiebobs

but how far would it go, as i said i'm paying more than repayment but if we decided one day to go back to I/O, it would only take C and G a click of a button to change me to repayment, which they could do and dress up up as risk management or something....

Pete111

We are IO with First Direct, but have overpaid massively over the past 2 years and paid off approx 40% of the loan.

It was sold to us as a fully flexible, offset bells and whistles job and it's clear we are paying far over the IO minimum anyway - why would they choose to hassle us?