Lloyds Checking IO Mortgages for Fraud and other stories

Graham_Devon

RenovationMan wrote: »

Only on this board can we instantly go from discussing Interest Only mortgages to reposession. To some on here, they are hand in golve, but in the real world your no more likely to get repo'd with an IO mortgage than with a repayment. In fact, you could argue that people with an IO mortgage have more of a fighting chance against reposession because their monthly outgoings on their mortgage are that much less.

I have a £270k interest only mortgage, am I to expect the bailiffs driving up our field at any moment?

But surely if they put people onto repayment (which is just a guess really as to something they could do if you have no other suitable vehicle), that could be a hefty chunk of extra money your mortgage suddenly costs you each month.

For example, on a mortgage of 160k, difference at 5% is:

Interest only = £666
Repayment = £946

So if borrowers were required to move onto repayment, they face an extra £280 a month (plus, maybe, any backpayments to bring them up to date?).

Otherwise, what else could Lloyds do? They can check, but surely there is no point in checking if they are not actually going to do anything about those mortgages with no way of repaying?

Wouldn't be worth the cost of the exercise if they were going to do absolutely nothing.

olly300

Graham_Devon wrote: »

But surely if they put people onto repayment (which is just a guess really as to something they could do if you have no other suitable vehicle), that could be a hefty chunk of extra money your mortgage suddenly costs you each month.

Not necessarily.

It depends on the term and the interest rate.

Heyman_2

RenovationMan wrote: »

Only on this board can we instantly go from discussing Interest Only mortgages to reposession. To some on here, they are hand in golve, but in the real world your no more likely to get repo'd with an IO mortgage than with a repayment. In fact, you could argue that people with an IO mortgage have more of a fighting chance against reposession because their monthly outgoings on their mortgage are that much less.

It's a fair point, but if the lender found that you had no repayment vehicle in place then they'd be bound to take some sort of action, wouldn't you agree? If you've only budgeted for paying an IO mortgage and you have to move to a capital repayment product, you would definitely see your payments jump by a potentially huge amount - especially if you got your IO mortgage in 'the good old days' of low interest lifetime trackers etc

RenovationMan wrote: »

I have a £270k interest only mortgage, am I to expect the bailiffs driving up our field at any moment?

Of course not, but it does appear that lenders are getting twitchy about their previous IO mortgages now, hence this latest story.

olly300

Graham_Devon wrote: »

But surely if they put people onto repayment (which is just a guess really as to something they could do if you have no other suitable vehicle), that could be a hefty chunk of extra money your mortgage suddenly costs you each month.

For example, on a mortgage of 160k, difference at 5% is:

Interest only = £666
Repayment = £946

So if borrowers were required to move onto repayment, they face an extra £280 a month (plus, maybe, any backpayments to bring them up to date?).

No back payments.

It will be a new mortgage product sold to them.

I think one of the issues is that some brokers upped people's incomes on the mortgage application.

I know someone this happened to. Luckily she caught them in time.

Radiantsoul

RenovationMan wrote: »

Only on this board can we instantly go from discussing Interest Only mortgages to reposession. To some on here, they are hand in golve, but in the real world your no more likely to get repo'd with an IO mortgage than with a repayment. In fact, you could argue that people with an IO mortgage have more of a fighting chance against reposession because their monthly outgoings on their mortgage are that much less.

I have a £270k interest only mortgage, am I to expect the bailiffs driving up our field at any moment?

Presumably interest only mortgages are more sensitive to interest rate rises as at least with a repayment mortgage their is a capital element that is fixed.

Thrugelmir

A._Badger wrote: »

What I am wondering is what proportion of interest only deals fail, compared with repayment loans. Indeed, what proportion of loans fail at all and has it changed?

The issue isn't loans failing. But increasing numbers of people heading for retirement with outstanding mortgages and insufficent income to repay the debt.

Life is a cycle. Many peoples earning power diminishes in later life.

A._Badger

Thrugelmir wrote: »

The issue isn't loans failing. But increasing numbers of people heading for retirement with outstanding mortgages and insufficent income to repay the debt.

Life is a cycle. Many peoples earning power diminishes in later life.

With respect, I think the problem is that we have no idea what the issue is at the moment, other than that Lloyds has started to get cold feet.

Lloyds was aware of the ages of its customers when it did its deals - more so than it was their precise incomes, that's for sure.

gagahouse

Don't know what the overall mix is, but couldn't some of these IO mortgages be those they inherited from HBOS which were never vetted by them when they were written? Maybe they've determined they don't like the risk profile of HBOS mortgage book and are looking to reduce it.

ess0two

RenovationMan wrote: »

Only on this board can we instantly go from discussing Interest Only mortgages to reposession. To some on here, they are hand in glove, but in the real world your no more likely to get repo'd with an IO mortgage than with a repayment. In fact, you could argue that people with an IO mortgage have more of a fighting chance against reposession because their monthly outgoings on their mortgage are that much less.

I have a £270k interest only mortgage, am I to expect the bailiffs driving up our field at any moment?

Knock,Knock Renoman

PasturesNew

£100k, IO at 5% over 25 years = £417/month.
£100k, Repayment at 5% over 25 years = £585/month

£270k, for our chum Mr Big Owse, is £1125 -v- £1578.