Home owners to be moved off interest-only mortgages

MissMoneypenny

Those people on an interest only, variable tracker and hoping to jump on a fixed, interest only repayment when the interest rates rise, are going to get caught by this.

silvercar

treliac wrote: »

Except that for a good few that 'some point' is some distant point in time when they think they will have inherited, be able to downsize and release equity or some other miracle will have occurred!

Thrugelmir wrote: »

Miracle is an apt summary. On a wing and a prayer is my personal thought.

I don't think it takes a miracle for children to leave home and be happy to downsize. All it takes is time. Some people will be very happy to have lived in a large family home when the children were young and now be able to live mortgage free in a smaller property.

neverdespairgirl

Generali wrote: »

I am corrected.

Foreclosure presumably has a different specific meaning in Australia and the US. In both countries it seems to be used as the term to describe someone taking possession of collateral used to back a loan.

I'm not sure about the USA or Australia. It's not what foreclosure means here, though, promise.

RenovationMan

silvercar wrote: »

I don't think it takes a miracle for children to leave home and be happy to downsize. All it takes is time. Some people will be very happy to have lived in a large family home when the children were young and now be able to live mortgage free in a smaller property.

I gave up trying to explain the concept of this. They get it, theyre not stupid, it just doesnt fit into their argument so they pretend it doesnt exist.

Nothing like a good Daily Mail style rant about something and nothing though, eh?

Thrugelmir

silvercar wrote: »

I don't think it takes a miracle for children to leave home and be happy to downsize. All it takes is time. Some people will be very happy to have lived in a large family home when the children were young and now be able to live mortgage free in a smaller property.

To downsize somebody has to upsize. Markets need both a buyer and seller. So not everybody is going to be able to fulfill their dream.

Realising a £100k of equity on downsizing doesn't much of an anniuty or income for retirement years.

treliac

Thrugelmir wrote: »

Realising a £100k of equity on downsizing doesn't much of an anniuty or income for retirement years.

Especially if it's got to be used to pay the outstanding capital loan on the previous I/O mortgage.

Some people will have made sensible arrangements to pay off their original loan but I fear many won't. For too many, for too long, life has been about living for today and blow the consequences for tomorrow. Especially when the state has been prepared to pick up the pieces if things go wrong.

silvercar

Thrugelmir wrote: »

T
Realising a £100k of equity on downsizing doesn't much of an anniuty or income for retirement years.

Its not meant to be an income, its meant to be the home for retirement outright.

So my friends bought for £200k in 1992, MEW'd a few times and the mortgage now stands at about £250k (mad, I know). The property was once worth 600k, now its probably 550k, but lets say 500k. That difference is 250k, for which they can get a decent 3 bed flat with no mortgage. That is their plan C, plan A was to be able to pay off the capital and stay in the home. Plan B was to use the endowments to pay off the mortgage, which could have happened if they hadn't increased the mortgage to fund their lifestyle. They have a pension, they also have some endowments that will mature in the next few years, netting around 100k, so the increase on property value only needs to fund a home.

RenovationMan

Thrugelmir wrote: »

To downsize somebody has to upsize. Markets need both a buyer and seller. So not everybody is going to be able to fulfill their dream.

Realising a £100k of equity on downsizing doesn't much of an anniuty or income for retirement years.

Your comparing apples and oranges again Thrugelmir. To turn this around, how is a fully paid off house going to provide much of an annuity or income for retirement?

RenovationMan

treliac wrote: »

Especially if it's got to be used to pay the outstanding capital loan on the previous I/O mortgage.

Some people will have made sensible arrangements to pay off their original loan but I fear many won't. For too many, for too long, life has been about living for today and blow the consequences for tomorrow. Especially when the state has been prepared to pick up the pieces if things go wrong.

Are you saying that everyone with a repayment mortgage is financially astute with decent emergency savings and fully topped up pension plan and everyone with an IO mortgage is financially inept with no emergency savings and zero pension savings?

I dont see the leap of logic that our whole financial circumstances are dictated by the type of mortgage we have. For instance, do people with IO mortgages all have low-level jobs with no company pensions and low incomes, while all repayment people are high-flyers with final salary pensions and 6 figure salaries?

Only on here are things so cut and dried and so black and white.

treliac

RenovationMan wrote: »

Are you saying that everyone with a repayment mortgage is financially astute with decent emergency savings and fully topped up pension plan and everyone with an IO mortgage is financially inept with no emergency savings and zero pension savings?

Not at all.

My feeling, from people I have lived and worked alongside, is how financially naive/irresponsible it is possible for people to be. Especially when they have had years of being able to juggle endless borrowing, live beyond their means, and not had to address the matter of paying for an unaffordable lifestyle.

People come in all psychological shapes and sizes. Of course, the sensible amongst us haven't behaved like that and have made proper provision for the future.

Only on here are things so cut and dried and so black and white.

The most likely scenario for people 'on here' is that they are more financially savvy than most and more likely to be facing their financial responsibilities and dealing with them wisely.