People in thier 60's being forced to sell homes.

RenovationMan

chewmylegoff wrote: »

i don't have a fundamental problem with it. on one level it makes sense to lend to her as low risk of default given amount of equity in the property, and they are getting 4.2% interest until she karks it, when they get their principle back. unless they think they can relend at a higher rate than 4.2% (bearing in mind if they lend to a FTB at 95%LTV they may have to keep more capital on their balance sheet than with a 30%LTV loan (although the fact it is interest only may skew, not sure) this isn't just a straight comparison of which interest rate is higher).

conrad thinks one reason they won't extend the arrangement is that they don't want the risk that they will later receive a complaint that they missold an interest only mortgage to her.

also to take into consideration is that if she does stop paying and they need to repossess then there may be some difficulty with doing that- e.g. if she goes into care home and income is diverted to pay fees there so can't pay mortgage. what happens then? will the court allow repossession to take place. will the bank have to wait until she dies to get interest and capital out of proceeds of sale. blah blah blah.

may also be something around risk-weighted assets here - not sure what they'd have to do with this loan on their balance sheet.

in any event, it's santander's problem with her remaining on an IO mortgage that she needs to worry about, not mine.

Thanks cmlo, most of what you put there was the point I was going to make. The bank has very low risk and instead of receiving the balance and that's the end of it, they will continue to receive years worth of extra interest and then have the balance paid off.

Rather than reposesses, the more likely scenario would have been that they received interest for years (how nice for the bank's profits) until the lady died and the house passed onto the children. The children would then have the option to sell the house or live in it themselves. Either way they would be expected to continue servicing the mortgage debt.

I fail to see what the problem here is. If the lady keeps the IO mortgage going for another 30 years via her pension, then the ramifications are that the bank makes a huge profit on the initital loan at very little risk and the lady gets to live in her home until she dies with very good security of tenure.

Who is actually losing out?

Neverland

RenovationMan wrote: »

You have my apologies, I skimmed the thread and so must have missed some information as I didn't realise that the home owner had a mortgage with RBS/Lloyds or that the tax payer were keeping this lady in her house.

Is the mortgage being paid by SMI or something?

The UK national debt went up about £150bn to bail out the banks in 2008 and 2009

Equally, the whole purpose of the £325bn money printing program is to support the banks and people (like this) who couldn't pay off their loans at normal market interest rates

The only way we will get all that money back is by the banks extricating themselves from bad lending decisions like giving this woman a loan she can't repay

This is why she shouldn't be allowed to roll over a loan she can't repay

Having read a few of your other posts you will probably not want to acknowledge a statement of the facts ...but they are what they are

RenovationMan

Neverland wrote: »

The UK national debt went up about £150bn to bail out the banks in 2008 and 2009

Equally, the whole purpose of the £325bn money printing program is to support the banks and people (like this) who couldn't pay off their loans at normal market interest rates

The only way we will get all that money back is by the banks extricating themselves from bad lending decisions like giving this woman a loan she can't repay

This is why she shouldn't be allowed to roll over a loan she can't repay

Having read a few of your other posts you will probably not want to acknowledge a statement of the facts ...but they are what they are

LOL. So this little old lady caused all that with her IO mortgage, zero defaults and probably zero non-mortgage debts!!

Goodness me, move over Hitler and Pol Pot, we have found history's greatest monster!

Neverland

RenovationMan wrote: »

Who is actually losing out?

Taxpayer who have to fund an uncomfortably high level of national debt from abiling out the banks through higher taxes

All citizens in the UK through reduced services caused by spending cuts to pay down the deficit

Public sector workers through wage freezes and redundancies

Savers who get lower savings returns because of QE

i.e. about 99.9% of the population of the country...

RenovationMan

Neverland wrote: »

Taxpayer who have to fund an uncomfortably high level of national debt from abiling out the banks through higher taxes

All citizens in the UK through reduced services caused by spending cuts to pay down the deficit

Public sector workers through wage freezes and redundancies

Savers who get lower savings returns because of QE

i.e. about 99.9% of the population of the country...

So this little old lady caused all this? Get down off your soapbox you're making yourself look a complete idiot.

Neverland

RenovationMan wrote: »

LOL. So this little old lady caused all that with her IO mortgage, zero defaults and probably zero non-mortgage debts!!

Goodness me, move over Hitler and Pol Pot, we have found history's greatest monster!

Lots of bad lending decisions by a wide range of UK banks led to this problem

Equally a lot of borrowers were dumb !!! stupid

Now they need to be worked through one at a time

Unsurprisingly the consequences for the borrowers aren't too comfortable

Neverland

RenovationMan wrote: »

So this little old lady caused all this? Get down off your soapbox you're making yourself look a complete idiot.

Go back under your bridge troll

Emy1501

RenovationMan wrote: »

Thanks cmlo, most of what you put there was the point I was going to make. The bank has very low risk and instead of receiving the balance and that's the end of it, they will continue to receive years worth of extra interest and then have the balance paid off.

Rather than reposesses, the more likely scenario would have been that they received interest for years (how nice for the bank's profits) until the lady died and the house passed onto the children. The children would then have the option to sell the house or live in it themselves. Either way they would be expected to continue servicing the mortgage debt.

I fail to see what the problem here is. If the lady keeps the IO mortgage going for another 30 years via her pension, then the ramifications are that the bank makes a huge profit on the initital loan at very little risk and the lady gets to live in her home until she dies with very good security of tenure.

Who is actually losing out?

Something like 50% of those on SMi are over 50. The bank for what ever reason have decided that for what ever reason that this lady is a risk that they no longer wish to entertain. If her term is up then they are entitled to their money back.

If they went for repossession and were refused that it would make credit even harder to come by because all lenders would have factor in that they were lending not over a term put to death.

Of course if she was to live in the house for another say 20 years and kept up with the repayments then it would be win win for the lender. I suspect though that the bracket she is in does not have a good track record of paying up when you look at SMI and therefore it does not make sense to lender to continue lending.

shortchanged_2

RenovationMan wrote: »

I fail to see what the problem here is. If the lady keeps the IO mortgage going for another 30 years via her pension, then the ramifications are that the bank makes a huge profit on the initital loan at very little risk and the lady gets to live in her home until she dies with very good security of tenure.

Who is actually losing out?

So under your grand plan Renoman, the banks would own all of the mortgaged properties in the UK for ever and ever. Is that right?

So basically the banks become nothing more than giant landlords for all of the UK mortgaged properties.

Pennywise

How will she afford her mortgage if she needs to pay for care? Surely her pension will have to be used to pay for carers or a care home, meaning little or nothing is left over for the mortgage, resulting in default and ultimately repossession.

Same with costs of upkeep of the premises. How will she finance the replacement roof, or new central heating system, kitchen or bathroom? Homes that aren't kept up to date lose value rapidly.

I think it's gross stupidity to take on an IO mortgage without a repayment plan. Even more stupid/negligent are the advisers who facilitated such a mortgage in the first place. It may be just about affordable given her current circumstances, but what if interest rates rise and the interest becomes £1,000 instead of £500, or if she needs care, or the house needs money spent on it.

The woman in question is living in a half a million pound house that she can't afford. If ever there was a case for the elderly being forced/encouraged to down size to a more appropriately sized house, this is a classic example.