Lloyds Checking IO Mortgages for Fraud and other stories

olly300

shortchanged wrote: »

Do you really think that?

I wonder how many people with IO mortgages have little or no provision to pay off the capital at the end of the term?

I know different types of people with IO mortgages.

Most of them are business people/self employed who pay of chunks of capital as and when their businesses allow it.

The other lot plan on selling their homes and think they will make a profit. Some of them in this group will be fine as their homes are big enough for them to stay in for the next 10-15 years, others will be screwed. None of them are near retirement age.

Endowment mortgages were sold to people as a way of investing and making enough money to pay of the mortgage with possibly some money left over for themselves. (I still remember one of my siblings' explaining how they work as my mum said they were a con.)

shortchanged wrote: »

As I stated earlier IO mortgages have done nothing but help fuel the hyper inflated housing market as we know it today.

It's not the only reason. The fact that interest rates are and were low helped.

Plus lots of the fuel was the large multiples that you could get if you had a clean credit record for repayment mortgages at very low initial interest rates.

olly300

Thrugelmir wrote: »

There was a recent press article which highlighted the problem. A third of people working between the ages of 60 -69 are still carrying mortgage debt. Around 50% of over working 50's carry debt as well. This restricts the ability to save for retirement.

My elder siblings in their 50s have mortgages.

Mainly because they brought in their 30s.

However the outstanding amount on their mortgages is very low.

They also have pensions.

If the worse came to the worse and they had to take their pensions they could still afford to continue paying their mortgages as the repayments are very low.

shortchanged_2

olly300 wrote: »

It's not the only reason. The fact that interest rates are and were low helped.

Plus lots of the fuel was the large multiples that you could get if you had a clean credit record for repayment mortgages at very low initial interest rates.

I never said it was the only reason. As you stated other factors such as 125% mortgages and silly multiples of lending also contributed.
But surely you cannot deny that IO mortgages have probably done more harm to the housing market than good. There must be thousands of people who took them out to buy a house while the lending criteria was weak by falsely believing they could actually afford the said house. Which in turn helped pump up the housing market to the silly levels it reached.

A._Badger

shortchanged wrote: »

I never said it was the only reason. As you stated other factors such as 125% mortgages and silly multiples of lending also contributed.
But surely you cannot deny that IO mortgages have probably done more harm to the housing market than good. There must be thousands of people who took them out to buy a house while the lending criteria was weak by falsely believing they could actually afford the said house. Which in turn helped pump up the housing market to the silly levels it reached.

'There must be thousands...' simply isn't good enough. If you are proposing that an otherwise free market be shaped or controlled in some way, you really have to produce some hard evidence for serious damage being done, not an emotional response based on what you feel to be the case.

I don't like the idea of IO, but I don't see any reason why grown-ups shouldn't be allowed to enter into deals they believe are right for them.

ILW

A._Badger wrote: »

'There must be thousands...' simply isn't good enough. If you are proposing that an otherwise free market be shaped or controlled in some way, you really have to produce some hard evidence for serious damage being done, not an emotional response based on what you feel to be the case.

I don't like the idea of IO, but I don't see any reason why grown-ups shouldn't be allowed to enter into deals they believe are right for them.

When the taxpayer ends up bailing out both the lender and the borrower, there is an argument for controls

Graham_Devon

ILW wrote: »

When the taxpayer ends up bailing out both the lender and the borrower, there is an argument for controls

Yup, my feelings exactly.

olly300

ILW wrote: »

When the taxpayer ends up bailing out both the lender and the borrower, there is an argument for controls

Doesn't automatically mean that IO was bad.

It just means like with other mortgage types including repayment mortgages, some lenders i.e. NR, HBOS didn't give a damn who they lent money to.

ILW

I can see an argument for not giving IO mortgages unless a credible repayment vehicle is documented.

olly300

ILW wrote: »

I can see an argument for not giving IO mortgages unless a credible repayment vehicle is documented.

A Badger and then blueboy43 have already pointed out that what lenders think is a credible repayment vehicle has been shown by history not to be one.

And I've pointed out that there are people who have repayment plans which aren't actually a vehicle. You can look at their accounts from past years but that is still not a repayment vehicle.

Endowment mortgages were found to have been mis-sold in lots of cases. I had a friend on an ISA mortgage so I related all the information I gleamed on endowment mortgages to them. They talked it over with one of their wise parents and ended up changing to a repayment mortgage.

nearlynew

Most people who take out IO mortgages do so because the lower monthly payment enables them to "buy" a more expensive house than they could otherwise afford.