UKs biggest lender ends IO mortgages without evidence.

geneer

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

HAMISH_MCTAVISH wrote: »

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

You said it bruv.

geneer

HAMISH_MCTAVISH wrote: »

Bollox.

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

Figures from the Council of Mortgage Lenders (CML) show in 1994, 61% of mortgages sold were on an interest-only basis where the borrower declared they had a separate repayment plan, while 12% were interest-only deals where no plan was in place. Many of the 61% would have been on an endowment basis.

By 1999, 31% were interest-only with a repayment plan, but the percentage sold without a plan shot up to 22% of all mortgages, equating to almost 400,000 new home loans in that year alone.

I reckon you're wrong. :rotfl:

geneer

http://www.guardian.co.uk/money/2006/jul/22/mortgages.property

From July 2006 (15 months from C-day).

Interest-only mortgage crisis looms

They look like an attractive, low-cost option, but borrowers should beware of a potentially huge bill 25 years on. John Caine reports

Is this the next major financial scandal in the making? One in four borrowers are taking out low-cost "interest-only" mortgages as the only way they can afford sky-high property prices - but with little hope of paying off the capital sum.
Many borrowers - particularly those who have remortgaged to a cheaper deal - may not even understand that they have a loan which, when it matures in 15, 20 or 25 years' time, will leave them with a huge bill. In the worst case, householders in their 50s and 60s could face repossession if they cannot stump up tens or even hundreds of thousands of pounds.
Lenders admitted this week they have lost track of the situation. Because lenders ceased checking that payments were being made into repayment vehicles during the 1990s, they now have no idea if a customer has set up a way to repay the capital sum.

The Financial Services Authority sounded the alarm this week in a thinly veiled warning to lenders to get their house in order, putting interest-only mortgages at the top of its list of "emerging retail risks".
It said: "An analysis of data on sales of regulated mortgages between April 2005 and December 2005 indicated that an increasing number of mortgages were being completed on an interest-only basis, with the lender not recording that there was a linked repayment vehicle in place.
"Interest-only mortgages, especially ones where there is no repayment vehicle in place, may represent a greater risk to consumers than a repayment mortgage. While these are appropriate mortgages for some consumers, they are not suitable for everyone."
There are worrying signs of irresponsible lending by mortgage companies happy to push loans without properly explaining the consequences of taking the interest-only route.
Glen Morris, of mortgage broker Berkeley Consultants, says: "Some of the big lenders are prepared to offer interest-only mortgages to people we would not consider suitable, based on nothing more than the completion of an application form."
Research by the Council of Mortgage Lenders shows that 200,000 borrowers with interest-only mortgages failed to set up a repayment vehicle, and more than 60,000 of those are first-time buyers.

I'm sure this in no way contributed to the bubble of course.

StevieJ

geneer wrote: »

I reckon you're wrong. :rotfl:

When I switched from the Halifax to A&L in 2005 they didn't ask to see any evidence of my repayment vehicle, it didn't mean I didn't have one.

geneer

StevieJ wrote: »

When I switched from the Halifax to A&L in 2005 they didn't ask to see any evidence of my repayment vehicle, it didn't mean I didn't have one.

Lordy. That an overwhelming amount of anecdotal evidence there Stevie.

Jojo1daffy

I don't get it. If you have to show that you are going to be making payments into an ISA as your repayment vehicle..why not have a repayment mortgage and be paying that money off the capital? Am I missing something......?

shortchanged_2

Jojo1daffy wrote: »

I don't get it. If you have to show that you are going to be making payments into an ISA as your repayment vehicle..why not have a repayment mortgage and be paying that money off the capital? Am I missing something......?

Plus with a repayment mortgage there is no way you can be tempted to spend it on a holiday or a new car or something else.

StevieJ

Jojo1daffy wrote: »

I don't get it. If you have to show that you are going to be making payments into an ISA as your repayment vehicle..why not have a repayment mortgage and be paying that money off the capital? Am I missing something......?

You could be subscribing to a lucrative company share option scheme for example.

HAMISH_MCTAVISH

geneer wrote: »

200,000 borrowers with interest-only mortgages failed to set up a repayment vehicle
.

200,000??? Out of 12,000,000 mortgages....

Like I said, vanishingly small.

Yeah..... Nice straw clutching there.

julieq

Jojo1daffy wrote: »

I don't get it. If you have to show that you are going to be making payments into an ISA as your repayment vehicle..why not have a repayment mortgage and be paying that money off the capital? Am I missing something......?

Because it's fairly easy to beat mortgage rates with safeish investments or savings bonds, and having that cash available to you in case of need will buffer you against shocks. It's a hell of a lot more savvy than repayment or overpayment which locks your cash away where you can't get it and doesn't save you from repossession, there's no particular benefit in owning a fraction more of a house but having no cash if you lose your job for a year or two.

As shortchanged notes though it does need discipline. Not for everyone.