Home Equity increases by 2.7% in 2011

Graham_Devon

RenovationMan wrote: »

Can you supply details of this evidence that a larger proportion of IO mortgages don't have repayment vehicles than do? I'd be amazed.

Sure...

From the FSA...

The largest proportion (65%) of borrowers fell into group 2; they had no recognised repayment vehicle in place but claimed they had other plans and strategies to pay back their mortgage. More than two in five of this group planned to use monies from property sale and 16% planned to switch to a repayment mortgage later. A significant proportion of this group plan to sell the mortgaged property despite the property having a high loan-to-value ratio. A further group planned to switch to a repayment mortgage; however, for many they would no longer have the option of aconventional 25-year term without taking the mortgage into retirement.

Infact, only 22% of those having taken IO mortgages had recognised repayment vehicles in place.

13% had no repayment vehicle in place, and had no idea of even how they might pay off the loan.

http://www.fsa.gov.uk/pubs/consumer-research/crpr56.pdf

shortchanged_2

Breaking news RenoMan.

The value of a house can go down as well as up.

And it's what the lendors surveyor says the value of your house is that matters at the time of remortgage not anyone else. And if they value your house less than what you think it's worth then you fail your own equity challenge.

As you said while you still have a mortgage it's the banks who decide how much your property is worth and this is so until you actually sell your property when you may actually get more or less than what they valued it at. However, if you stay there for the rest of your life who really gives a sh*t what your house is worth.

chucknorris

Graham_Devon wrote: »

Sure...

From the FSA...

Infact, only 22% of those having taken IO mortgages had recognised repayment vehicles in place.

13% had no repayment vehicle in place, and had no idea of even how they might pay off the loan.

http://www.fsa.gov.uk/pubs/consumer-research/crpr56.pdf

I don't have a recognised repayment vehicle either I simply save in the best fixed rate bond available at that particular time, there's no point in paying off my mortgages when I can get a higher net savings rate.

On the other hand my wife was on SVR mortgages so was paying more in mortgage payments than net savings interest but she paid off her last SVR mortgage a couple of months ago, she only has one mortgage left now which is shared with me and its a tracker at only 0.38% over base.

RenovationMan

shortchanged wrote: »

Breaking news RenoMan.

The value of a house can go down as well as up.

And it's what the lendors surveyor says the value of your house is that matters at the time of remortgage not anyone else. And if they value your house less than what you think it's worth then you fail your own equity challenge.

As you said while you still have a mortgage it's the banks who decide how much your property is worth and this is so until you actually sell your property when you may actually get more or less than what they valued it at. However, if you stay there for the rest of your life who really gives a sh*t what your house is worth.

Glad to see that you read and, more importantly, understood my description of mortgage valuations for 5 year olds.

Just to recap, the mortgage valuation in my signature never changes because I don't get the mortgage lender to value my property every month. The actual value is immaterial, it's the value the lender sets it at when you get your mortgage.

When I get a new mortgage deal, I'll have a new valuation to work with and a new mortgage challenge to keep me motivated. Simples.

Glad you now understand, hopefully we'll have no more of those silly digs you feel compelled to have against the valuation figure in my signature?

RenovationMan

Graham_Devon wrote: »

Sure...

From the FSA...

Infact, only 22% of those having taken IO mortgages had recognised repayment vehicles in place.

13% had no repayment vehicle in place, and had no idea of even how they might pay off the loan.

http://www.fsa.gov.uk/pubs/consumer-research/crpr56.pdf

Hmnn, that report was written in 2006, which is knocking on 6 years old. If you compare 2006 to six years earlier in 2000 you'd be at the start of the boom which I'm sure you'll agree was worlds away from the mortgage market in 2006, just as the mortgage market in 2012 is worlds away from what it was like in 2006.

While it makes interesting historical reading of the mortgage market towards the end of a huge housing boom, I'm not sure it's reflective of the whole IO market, which is what I asked for.

You promised to back up your claims that a larger proportion of IO mortgages have no repayment vehicle than do have one. You supply a report that shows a snapshot of 857 borrowers who took out their IO mortgages over a 9 month period in 2006. Hardly representative of all interest only mortgages taken out from 1987 to 2012, now is it? Even 16% of those without repayment vehicles intended getting repayment mortgages in the future - I would imagine that 6 years later most of them would have one by now.

I guess I'm still waiting to be amazed.

RenovationMan

Pimperne1 wrote: »

Actually I think he is being a bit unfair on those who are reaching the end of their repayment mortgages - they are paying off considerably more than 4% of their capital per year.

Quite so. It therefore averages out over the term of the mortgage, and I used a 'notional' repayment amount, just as people often use 'notional' drops in house prices in their posts.

My analysis was also unfair because so many people are overpaying their mortgages and I have excluded them. My own overpayments have represented a 20% increase in my equity holdings, from £150k to £200k. I'm not alone in making such inroads into my mortgage, as most of my peers (friends and colleagues) are doing the same while we enjoy low rates and uncertain futures.

That £50k I have paid off over the last 2 years also represents an annual reduction to my mortgage repayments of £1270, which goes on to assist my future overpayments, creating an increasing spiral of overpayments while low rates are prevalent.

JonnyBravo

Thrugelmir wrote: »

Depending on the average rate over the term of the mortgage.

People will still owe somewhere between 28% to 35% of their original mortgage advance with 5 years to go.

Good to see you've remembered the chat about how the capital repayment rate varies with interest rate being charged. No more silly "Rule of 51" eh?
Still HTH.

Graham_Devon

RenovationMan wrote: »

Hmnn, that report was written in 2006, which is knocking on 6 years old. If you compare 2006 to six years earlier in 2000 you'd be at the start of the boom which I'm sure you'll agree was worlds away from the mortgage market in 2006, just as the mortgage market in 2012 is worlds away from what it was like in 2006.

While it makes interesting historical reading of the mortgage market towards the end of a huge housing boom, I'm not sure it's reflective of the whole IO market, which is what I asked for.

You promised to back up your claims that a larger proportion of IO mortgages have no repayment vehicle than do have one. You supply a report that shows a snapshot of 857 borrowers who took out their IO mortgages over a 9 month period in 2006. Hardly representative of all interest only mortgages taken out from 1987 to 2012, now is it? Even 16% of those without repayment vehicles intended getting repayment mortgages in the future - I would imagine that 6 years later most of them would have one by now.

I guess I'm still waiting to be amazed.

Firstly I didn't promise anything. You asked me to back up my claims, and that's what I did. I chose the FSA, as I knew you would write anything else off as propoganda.

Quite why you want to write it off based on the fact it's from 2006 I don't really understand. These mortgages would have been included in your opening post.

If you want to write the above FSA findings off, then that's fine. But don't pretend it's not evidence of what I was saying, as it clearly is, and more fool you if you want to blinker past it.

homelessskilledworker

RenovationMan wrote: »

House Prices according to the Halifax fell by 1.3% in 2011, according to the Halifax Index.

http://www.bbc.co.uk/news/business-16438846

Given that people on a typical 25 year repayment mortgage repay 4% of their capital each year (increasing homeowner equity by 4%), the net effect of the 1.3% drop and the 4% equity gain on home owners is therefore an increase in their net equity wealth of 2.7%.

Not a bad return in these difficult times.

Are you for real?:rotfl:

JonnyBravo

RenovationMan wrote: »

You promised to back up your claims that a larger proportion of IO mortgages have no repayment vehicle than do have one.

Presumably you disagree then?
Have you any evidence? Even 6 years old?

I'm not saying that I/O mortgages are a ticking timebomb. I side with you. It's overblown by scaremongers/pessimists/doomsayers*
I'm another with an I/O mortgage and paying more back than on a repayment schedule, but that's another argument to "what proprotion have a repayment vehicle in place?"

* Delete according to taste