One million homes face Interest-only remortgage threat

wymondham

When we got our mortgage in 1990, it was interest only, with an endowment - we could not get just interest only - the lender made sure of it. If lenders stopped insisting on having a repayment vehicle then it's partly their fault???? this is not to excuse people though as they make the ultimate decision...

treliac

leveller2911 wrote: »

Given the fact that many have no repayment vehicle in place when the fixed rate comes to an end will the lenders let them carry on with an IO mortgage given that many many of them I know have little or no equity ???......Can't see it myself.

silvercar wrote: »

They move onto the lenders' SVR.

Is that automatic or could it be a point in time where lenders could insist on having evidence of a repayment vehicle, if they are getting twitchy about the situation?

silvercar

treliac wrote: »

Is that automatic or could it be a point in time where lenders could insist on having evidence of a repayment vehicle, if they are getting twitchy about the situation?

Its automatic, your mortgage contract would be for a 25 year mortgage whereby interest is fixed at 4% for the first two years following which it moves to the lenders SVR.

When people talk of a fixed rate of 4% for 2 years, that is really the first 2 years of a 25 year mortgage.

The problem comes when people expect to move at the end of their fixed rate to a new deal, either with the existing lender or with another lender. At that point the "new deal" is a new mortgage and the lender can ask for whatever they want. If you can't find a deal that will satisfy you and you satisfy the lender's requirements, you are stuck with the current lender's SVR.

This used to be the problem and why people in negative equity couldn't remortgage to a different lender. It may be that lenders will in the future only allow interest only if the borrower can show a repayment plan. The silver lining is that, with current very low interest rates, the lenders SVR is not a bad position. It was a problem when base rates where higher and the SVR was usually 2 or even 3 percentage points higher than fixed rate deals. Now the difference is small.

nembot

As they always say "Ren... Interest Only mortgage is dead money, with a sting in the tail"

[soz for the "..." just making a point]

SingleSue

RenovationMan wrote: »

I dont understand the thinking behind 'the house will never be theirs' either. Hands up anyone who is in their 40s and 50s and have children who are still living in their FTB house. Anyone?

Isnt the average number of house moves something like 6? Its very unlikely that anyone pays off one house completely before they move to the next house.

The only house that needs to be paid off is the one you retire to, and even then if you go into rented accomodation, not even that one.

My parents are still living in their first purchased home...purchased when they only had one child (with another on the way - me!), they went on to have 3 children.

So they are one of the 'unlikely' ones who completely paid off their first purchase and still live in it.

They are both now retired.

That said, they have moved more than 6 times, except all bar one was into rented accomodation and all (including the purchase) was for work reasons (dad in construction, they always moved to where the next project was)

I have moved 4 times in my adult life, only one was into a mortgaged home.

chucky

leveller2911 wrote: »

Fair do's Chucky,Am I right in thinking that the Nationwide made a promise that its mortgage rates would not be more than around 1.5% above base rate? and in doing so slashed savings rates to make up for the profit loss?

i don't know enough about the Nationwide but it wouldn't surprise me at all.

in the current 'functioning' banking model - lending money from your savers deposits doesn't really work too well (with the exception of HSBC who have a massive Asian market).

i don't think that model will ever come back to be fair - the wealth destruction that took place in 2008 will ensure that lending will be controlled for a long while yet

IveSeenTheLight

michaels wrote: »

Might be worth checking that statement out if it is for your main residence rather than a BTL - you can now get tracker deals that beat even the best SVRs

Believe me, I've checked and keep a regular eye out.
I'm not getting anything that beats the SVR worth the timeframe and arrangement fee's

Really2

IveSeenTheLight wrote: »

Believe me, I've checked and keep a regular eye out.
I'm not getting anything that beats the SVR worth the timeframe and arrangement fee's

If you have got 60% LTV (not sure what your SVR is.)

+1.69 for life £99 setup and no redemption.

IveSeenTheLight

Really2 wrote: »

If you have got 60% LTV (not sure what your SVR is.)

+1.69 for life £99 setup and no redemption.

I do have a lower LTV than 60%.
One of my SVR's is +1.1, no set up, no redemption.
The other SVR is a bit higher.

Send me a link and I'll review

RenovationMan

SingleSue wrote: »

My parents are still living in their first purchased home...purchased when they only had one child (with another on the way - me!), they went on to have 3 children.

So they are one of the 'unlikely' ones who completely paid off their first purchase and still live in it.

They are both now retired.

That said, they have moved more than 6 times, except all bar one was into rented accomodation and all (including the purchase) was for work reasons (dad in construction, they always moved to where the next project was)

I have moved 4 times in my adult life, only one was into a mortgaged home.

I'm confused, did they move 6 times before they bought their first house?