Cash-strapped families switch £60bn-worth of mortgages to interest-only

chucky

DervProf wrote: »

Not directly related, no. I said before that the article was using the two figures as a comparison. No, there are no conclusions, but I think it's fair enough to show the two figures.

A bit like this, for example.......

"Average gates at Premiership matches fell by 2,357 last year........

..... the average ticket price to a Premiership game was £35.43".

Not directly related, but maybe relevant.

You may not have agreed with the conclusions or the opinions put forward in the aticle about people switching to IO mortgages, but the stats that were published were relevant, in my opinion. As to the accuracy of those figures, who knows ?

i agree with the conclusions, there are people switching to interest only mortgages because they are struggling. fact.

i disagree that 300,000 people are struggling. why?? because you can't take the number of people switching to interest only loans and take a percentage of them and say they're struggling.

that's why i was asking those telling others to "wake up and smell the coffee" to explain how they got to 300,000. i'm still waiting for someone to come back to me explain that figure.

this is how the article got to that number:

in the third quarter of 2007 and the final three months of last year, the value of interest-only mortgages increased by £99bn and the number of borrowers rose by 369,370.

Over the three years, the proportion of loans classified as interest-only rose from 40.04pc to 42.95pc

As the total UK mortgage stock in that time increased from £1.13 trillion to £1.21 trillion, the value of interest-only lending should have risen by no more than £35bn

let me repeat it again just because the number of interest only mortgages increased it doesn't mean people are struggling.

Pete111

geneer wrote: »

Sorry, but "Interest only/offet" is not "interest only".

And the assertion that interest only is brilliant when you're paying off capital is, well, lets say a tad cross-eyed.

Umm yes it is - If I didn't offset anything it is 100% I/O....but I have the option to do so and I choose to take that up.

Incidentally my mortgage is brilliant. It's the flexibility I like the most. Pay nothing extra or pay/offeset loads off - then feel free to take it back if things get tight. For those of us able to manage finances it's great

Previously I had a repayment mortgage for 3 years and in that time paid off a rather unimpressive 3% of capital as the repayment portion was so loaded towards the end of the term. Not so brilliant...

Graham_Devon

chucky wrote: »

let me repeat it again just because the number of interest only mortgages increased it doesn't mean people are struggling.

No, this is how the article got to that number.

Some of those will have been new deals, but FSA sources confirmed the bulk were due to "forbearance" – as banks move homeowners on to more affordable payment plans to avoid defaults.

Although the regulator does not break out precise figures on new lending and "forbearance", the data shows that around two-thirds of the increase came from struggling households.

I realise you are completely blind, so I have highlighted the important words for you in a nice shade of red.

You are obviously being purposely obtuse. For what reason, I have absolutely no idea. But theres something lacking.

chucky

DervProf wrote: »

What I was trying to get at was that RenoMan was sort of fooling himself. I could do the same, like this.......

"I would say that it makes no difference to me what car I buy next, a £5K Porsche or a £5K Renault. Strip out the running costs and both will cost the same amount."

There is a more "technical" aspect to what RenoMan said too, and that's what I struggled to prove, as has been pointed out.

If you do "strip out" the repayment part of a repayment mortgage, then you have an IO mortgage. If you insist that you can "ignore" the capital repayment part of a repayment mortgage (but you are still on a repayment mortgage, and therefore paying the capital component), then the costs will differ, as the interest component will reduce each time you make a payment - the interest component won't decrease during the life of an IO mortgage (unless interest rates change, or you may repayments, if allowed).

And that's what I was trying to say. I don't think there is anything wrong with my reasoning, but I think there was something wrong with RenoMan's "idea".

can i say politely that i think you may be missing the point as other people have explained to you before.

an interest only mortgage is an interest only mortgage.
a repayment mortgage is a repayment mortgage.

you can't really have a repayment mortgage and not make capital repayments. that becomes an interest only mortgage unless you're on a payment holiday for example.

both can have capital repayments + their normal repayments. by making extra capital repayments you reduce the repayments on both interest and capital.

DervProf

chucky wrote: »

can i say politely that i think you may be missing the point as other people have explained to you before.

an interest only mortgage is an interest only mortgage.
a repayment mortgage is a repayment mortgage.

you can't really have a repayment mortgage and not make capital repayments. that becomes an interest only mortgage unless you're on a payment holiday for example.

I accept that you think I'm missing the point.

Please accept that I do understand the pros/cons and the way that repayment and IO mortgages work. Having had an offset mortgage, I know the effect of overpayments and offsetting only too well.

You said it yourself, that "you can't really have a repayment mortgage and not make capital repayments". So please, read what RenoMan wrote - he was ignoring the repayment part of a repayment mortgage, and to make matters worse, he said that it would make no difference to the cost of the mortage if he did.

chucky

Graham_Devon wrote: »

No, this is how the article got to that number.

I realise you are completely blind, so I have highlighted the important words for you in a nice shade of red.

You are obviously being purposely obtuse. For what reason, I have absolutely no idea. But theres something lacking.

i know you have no idea and you've just proved why you don't have no idea.

fine there is two/thirds. now to work out the average we need to work out how much is the total of the mortgages to work out the average mortgage.

do me a favour right... before you accuse others of being blind and obtuse come back to me when you have a better education, less ignorant, not stupid and understand what the outstanding amount on a mortgage is, because you don't.

until then you remain the forum idiot

Graham_Devon

chucky wrote: »

i know you have no idea and you've just proved why you don't have no idea.

fine there is two/thirds. now to work out the average we need to work out how much is the total of the mortgages to work out the average mortgage.

do me a favour right... before you accuse others of being blind and obtuse come back to me when you have a better education, less ignorant, not stupid and understand what the outstanding amount on a mortgage is, because you don't.

until then you remain the forum idiot

Well with the amount of abuse I got back, I guess I can safely state my point was proven.

Amusingly, you have written two/thirds and then called me an idiot

DervProf

chucky wrote: »

let me repeat it again just because the number of interest only mortgages increased it doesn't mean people are struggling.

I totally agree.

Shocking, I know.

Back later.

chucky

DervProf wrote: »

I accept that you think I'm missing the point.

Please accept that I do understand the pros/cons and the way that repayment and IO mortgages work. Having had an offset mortgages, I know only too well the effect of overpayments and offsetting only too well.

You said it yourself, that "you can't really have a repayment mortgage and not make capital repayments". So please, read what RenoMan wrote - he was ignoring the repayment part of a repayment mortgage, and to make matters worse, he said that it would make no difference to the cost of the mortage if he did.

i guess he must mean he had a repayment mortgage and stopped paying capital back and just paid interest. unless it was an offset product that would allow you to do this seamlessly.

i think you'll need him to get him to explain because i don't really understand what he meant then.

chucky

Graham_Devon wrote: »

Well with the amount of abuse I got back, I guess I can safely state my point was proven.

Amusingly, you have written two/thirds and then called me an idiot

not really because we still don't know how they got to £60 billion outstanding debt apart from hashing together the data.

if you want to be treated with respect you'll have to try much harder.

as i said until then being the forum idiot is something you'll have to live with.

could you explain this please, you're telling me i'm wrong but you seem to be struggling with the most basic of maths and accusing others of being obtuse and blind...

Graham_Devon wrote: »

Do you understand it?

The debt on a repayment mortgage is larger because you are repaying the capital aswell as the interest.

The debt on an interest only mortgage will be lower, because you are only paying the interest.

Therefore switching the debt from repayment to interest only turns an average 200k debt to an average 109k debt.

That will be the reason for the difference. That's why the payments become smaller.

Pretty poor chucky, for someone who questions everyone elses intelligence.