Home Equity increases by 2.7% in 2011

homelessskilledworker

DervProf wrote: »

It is my understanding (although as, you have suggested in the past, maths isn't my strong point) that mortgages don't work as you describe.

A 10 year mortgage does not get paid off 10% each year. Likewise, a 25 year mortgage does not get paid off by 4% per year. In the early years, a larger proportion of the monthly payment is going on interest, rather than repayment of the capital. As the years go by, a larger proportion of the capital is paid off each month (due to the interest on the outstanding loan being reduced). If anyone who has only being paying a mortgage for 1 year asks the lender what they still owe, it will not be much less than they borrowed (unless they made overpayments, or their interest rate is 0%).

I am assuming that you are describing a "normal" repayment mortgage.

You are right Derv, as the loan gets closer to the end more of it is paid off, in the early years you are paying lots of interest.
Of course there are quite a few mortages out there that have no repayment vehicle and are just interest only mortgages. The interest only mortgage has become more popular in recent years as just another tool to keep those over stretched with mortgage debt in their homes.

Just out of interest is there anyone on this board who has any numbers of those with interst only mortgages in the UK.

homelessskilledworker

homelessskilledworker wrote: »

You are right Derv, as the loan gets closer to the end more of it is paid off, in the early years you are paying lots of interest.
Of course there are quite a few mortages out there that have no repayment vehicle and are just interest only mortgages. The interest only mortgage has become more popular in recent years as just another tool to keep those over stretched with mortgage debt in their homes.

Just out of interest is there anyone on this board who has any numbers of those with interst only mortgages in the UK.

Just seen Cleaver's post:)

Cheers Dude

homelessskilledworker

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

Are you seriously saying that there are 100,000's(probably millions) of mortgages out there that have no means of paying back the capital.

Is it only me, but is there anyone else out there that finds this figure shocking.

pwllbwdr

homelessskilledworker wrote: »

You are right Derv, as the loan gets closer to the end more of it is paid off, in the early years you are paying lots of interest.

This is true, but the effect is much greater when the interest rates are higher. Thus at the moment the typical capital repayment schedule for someone on a relatively low rate of interest is much less skewed towards later years than would be the case if they were paying 7-8% interest.

JonnyBravo

homelessskilledworker wrote: »

Are you seriously saying that there are 100,000's(probably millions) of mortgages out there that have no means of paying back the capital.

Is it only me, but is there anyone else out there that finds this figure shocking.

It's just you.
Your mind set has conditioned you to assume the worst for all of these poor people. No doubt they are all to go bankrupt in your mind?

homelessskilledworker

JonnyBravo wrote: »

It's just you.
Your mind set has conditioned you to assume the worst for all of these poor people. No doubt they are all to go bankrupt in your mind?

Of course not all will have to go bankrupt, what a dumb thing to say. But like with many things if you give enough rope for people to hang themselves they will. If I was going to lend vast sums of money the first question I would ask is how are you going to pay me back, would'nt you?

When you think that there are many mortgages out the interest only that are £200k £300k £400k and even greater and 10 years has passed and there is still no repayment vehicle then surely the alarm should start ringing.

And even though I have no hard data to prove this I am ceratin that there are many out there that have a "hope something turns up later attitude".

Graham_Devon

JonnyBravo wrote: »

It's just you.
Your mind set has conditioned you to assume the worst for all of these poor people. No doubt they are all to go bankrupt in your mind?

Hardly any of them will go bankrupt.

But it's just as stupid to suggest there are no problems, as it is to suggest every single one of them will find problems.

I've already stated, my own parents became victim to it. Parents friends became victim to it. A colleague at work has realised he's become victim to it and put his house on the market as he'll never be able to pay it off.

Not saying any of these went bankrupt.

But am saying all of these above, which is just my personal experience, obviously had no means of paying it off, or had fallen short, and all are having to sell their homes when they don't particularly want to.

Equally, there will be people who HAVE or CAN pay their mortgage off.

But at the end of the day, it's a big enough problem for banks to act, and authorities to act. Just turning a blind eye and assuming that people will have got their finances together is just as stupid as pretending all interest only mortgages were timebombs.

A lot were timebombs, and a lot are yet to start ticking for families.

chucknorris

homelessskilledworker wrote: »

Are you seriously saying that there are 100,000's(probably millions) of mortgages out there that have no means of paying back the capital.

Is it only me, but is there anyone else out there that finds this figure shocking.

The 22% referred to in the report that had 'recognised repayment vehicles' in place only meant borrowers with ISA's, endowment polices or pension fund.

It excluded borrowers with savings, investment plans or strategies in place. So it is not correct to assume that all of the remaining 78% would not have the means to pay the capital back.

Graham_Devon

chucknorris wrote: »

The 22% referred to in the report that had 'recognised repayment vehicles' in place only meant borrowers with ISA's, endowment polices or pension fund.

It excluded borrowers with savings, investment plans or strategies in place. So it is not correct to assume that all of the remaining 78% would not have the means to pay the capital back.

It states quite clearly how the rest of the 78% sat.

A large proportion were hoping for HPI. Some planned to switch mortgages (wonder how thats gone, considering the mortgage market). Some planned to sell other property, which will have fallen in price.

I.e. gambling. Was ok at the time to suggest you would switch to a repayment when your wages have gone up. Thats exactly what an advisor was trying to sell to me. But I wouldn't have been able to. Not with the mortgage market as it is.

chucknorris

Graham_Devon wrote: »

It states quite clearly how the rest of the 78% sat.

A large proportion were hoping for HPI. Some planned to switch mortgages (wonder how thats gone, considering the mortgage market). Some planned to sell other property, which will have fallen in price.

I.e. gambling. Was ok at the time to suggest you would switch to a repayment when your wages have gone up. Thats exactly what an advisor was trying to sell to me. But I wouldn't have been able to. Not with the mortgage market as it is.

I know, it states 5% had no idea how they would repay the loan, this does not equate to 'millions' (however 78% would, hence my post).

In answer to your 'gambling' comment it depends when you bought, mine are worth much more than when I bought them, it also of course also depends when you sell them too, those in negative equity right now are unlikely to be so in 15 years time.