UKs biggest lender ends IO mortgages without evidence.

shortchanged_2

HAMISH_MCTAVISH wrote: »

I'm sure you missed an "in my opinion" there.

I suspect the numbers that couldn't afford a repayment mortgage were vanishingly small.

Not so sure Hamish. I'd put money on it that many of the mortgages granted to 1st time buyers during the boom years were on an IO basis.

Graham_Devon

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. Please.

You know full well why people took interest only mortgages. To keep monthly payments down. Therefore this will have a large affect on IO mortgage numbers.

Don't act dumb.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Hamish. Please.

You know full well why people took interest only mortgages. To keep monthly payments down. Therefore this will have a large affect on IO mortgage numbers.

Don't act dumb.

Bollox.

I reckon the numbers who took I/O mortgages because they couldn't afford repayment ones were vanishingly small.

julieq

Again, all you have to do to qualify for an IO mortgage is to show evidence of saving into an ISA.

So what will a buyer have been doing to generate a deposit exactly?

So it doesn't exactly take Hercule Poirot to figure out that this isn't going to be a difficult criteria to meet.

The lenders have no problem with IO mortgages, and the FSA don't in particular, they are concerned with combinations of risk factors - IO into an offset mortgage is one they're not keen on because there is a temptation to extend borrowing. This "restriction" looks more like a way of bypassing proposed rules while appearing to meet them than anything else.

But will it have much of an effect? No. It just moves the bar up a little for those wanting to buy. Means more people will be renting for longer, and of those some won't be able to buy ever. Which is a shame.

StevieJ

I read that article and had to smile, evidence? what is that? your first payment into that ISA account

FATBALLZ

HAMISH_MCTAVISH wrote: »

Bollox.

I reckon the numbers who took I/O mortgages because they couldn't afford repayment ones were vanishingly small.

More of them probably took them out so they could !!!! the extra money away on tat instead.

shortchanged_2

"It isn't just those with high-value loans who face difficulties. Figures published by the FSA last year indicated that a quarter of all new mortgages granted were on an interest-only basis; in addition, one in four mortgage customers borrowed more than three-and-a-half times their salary. This figure was even higher for first-time buyers, 38pc of whom took out a mortgage on this higher income multiple. In both cases, homeowners would struggle to remortgage on these terms"

Taken from: http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/8097272/Rate-rise-threat-for-3m-home-owners.html

There you go Hamish some figures to mull over.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Bollox.

I reckon the numbers who took I/O mortgages because they couldn't afford repayment ones were vanishingly small.

What is "vanishingly" small.

I find it hard to believe the number was "vanishingly" small. Implying less and less took interest only mortgages when prices were rising and rising.

Point is, there are no figures. Therefore neither of us will be able to actually prove anything, and it all boils down to a disagreement.

All I can say, is there are more articles, which I would be able to find, to back up my viewpoint. I doubt you would be able to find any which back up yours.

Graham_Devon

julieq wrote: »

Again, all you have to do to qualify for an IO mortgage is to show evidence of saving into an ISA.

So what will a buyer have been doing to generate a deposit exactly?

So it doesn't exactly take Hercule Poirot to figure out that this isn't going to be a difficult criteria to meet.

While technically you are right. I don't think lenders will be that dumb. If they are doing this, they are doing it for a reason. It's not that they HAVE to do this. Yet, at least.

So what would be the point of them doing all this and changing their practices if all the buyer had to do was show he had a "repayment" vehicle, as he had a deposit.

That's not a repayment vehicle. It's a deposit, which will be gone as soon as the house is bought. Doesn't take a genius to recognise that.

Plus, it's the property optimists that go on and on about BOMAD. So all those people won't neccesarily have been saving. Rather they have been gifted a deposit.

However, on saying all that, it wouldn't really surprise me if the lender did take the deposit money as a "repayment" vehicle. Just don't really see what the point in changing their practices would actually be in this case.

julieq

The point about the source of a deposit being shown to be savings isn't a bad one. It shows a savings habit. But it would be ridiculous to increase the savings requirement to include both a deposit and a bit over on top of that.

There again, nothing to stop payments from BOMAD going into someone's ISA indirectly. So really it achieves very little. The more I look at this, the more it looks like a sidestep of the regulations.