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UKs biggest lender ends IO mortgages without evidence.
geneer
Posts: 4,220 Forumite
http://www.telegraph.co.uk/finance/personalfinance/8453472/Bank-ends-interest-only-mortgages-without-documentary-evidence.html
saweeeeeeeeeet
saweeeeeeeeeet
Bank ends interest-only mortgages without documentary evidence
Britain’s biggest mortgage lender has announced the end of interest-only mortgages without documentary evidence of how the loan is going to be repaid.
Halifax requires borrowers to provide written proof of how the loan will be repaid before a mortgage offer is made. Until April 6, it only asked borrowers to say that they had a repayment vehicle in place before the mortgage offer.
It is the latest example of banks and building societies tightening their lending criteria amid growing fears that home owners will default on their loans due to high unemployment.
Halifax allows borrowers to repay interest-only mortgages using endowment policies, Isas, pensions, shares, savings or the sale of a second home.
It means a borrower – who says they will use the money saved in Individual Savings Accounts to repay their home loan – must provide a copy of their latest Isa statement for the last 12 months before they can receive an offer from the lender.
Melanie Bien, mortgage brokers Private Finance, said: “High-street lenders have been tightening their interest-only criteria since the downturn because they regard these loans as more risky than repayment deals. If this continues, interest-only mortgages could vanish, or become so limited in scope that they are available to only a handful of borrowers.
“Interest-only loans aren't inherently bad. What about first-time buyers who don't have a repayment vehicle but are due an inheritance? Or someone with a modest income but sizeable and regular bonuses which can comfortably be used to clear the capital?
“‘One size fits all’ does not work when it comes to mortgages. For some borrowers, not all, interest only is the right choice.”
Lloyds TSB introduced the change earlier this year and has since scrapped the higher rate it used to charge for interest-only mortgages.
Other lenders have also tightened their policies on interest-only mortgages this year, with RBS and Coventry Building Society no longer offering this type of deal to first-time buyers.
RBS said: “It is prudent for first-time buyers to build up equity in their property by reducing the capital from day one.”
A Halifax spokesman said the changes were "designed to reflect the additional risks and responsibilities associated with interest only lending.”
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Comments
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saweeeeeeeeeet
And just like every other non-event you've dragged up for the last 3 years, it'll make not the slightest bit of difference.
Saweeeeeeeeeter“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
No, Hamish, he keeps his money in the CAR0
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Interest-only loans aren't inherently bad. What about first-time buyers who don't have a repayment vehicle but are due an inheritance?
Because inheritance is not a guaranteed income.
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HAMISH_MCTAVISH wrote: »And just like every other non-event you've dragged up for the last 3 years, it'll make not the slightest bit of difference.
Saweeeeeeeeeter
Not sure about that Hamish.
Needing to show you have been saving, or have at least held an ISA for 12m before taking an IO mortgage is going to have quite an impact on IO mortgages for this lender.0 -
“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
This is actually very good news. The number of people I know who have taken out interest only mortgages with no real idea what they are doing (i.e, don't even know they need a repayment vehicle).
In the boom years there was no doubt that IO mortgages were being given to help people with 'affordability' issues. Basically the banks were basing their decisions on whether the person could afford the monthly payments at the time of application and were not really considering earning multiples, hence you got the situation of 5 or 6 times earning multiple mortgages.0 -
Erm, if you have to save a 20% deposit, you're going to have a fairly good ISA saving history no?0
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Graham_Devon wrote: »Not sure about that Hamish.
Needing to show you have been saving, or have at least held an ISA for 12m before taking an IO mortgage is going to have quite an impact on IO mortgages for this lender.
Why take an I/O mortgage to begin with??? (other than specialist circumstances)
If you can't afford a repayment mortgage, then you shouldn't be buying a house.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
shortchanged wrote: »
In the boom years there was no doubt that IO mortgages were being given to help people with 'affordability' issues.
I'm sure you missed an "in my opinion" there.
I suspect the numbers that couldn't afford a repayment mortgage were vanishingly small.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »Why take an I/O mortgage to begin with??? (other than specialist circumstances)
If you can't afford a repayment mortgage, then you shouldn't be buying a house.
Hamish, I think that's the most sensible thing I've ever heard you say.0
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