MSE News: RBS and Natwest demand £50k salary for interest-only mortgages

michaels

Sorry but I think this is !!!!!!!! - 600k IO mortgages will apparently expire in the next 10 years - most mortgages run for 20 or 25 years so it is unlikely that many of these will see negative equity so how is a person who has rented from the bank for 20-25 years in any worse a position than someone who has rented from a landlord?

I am IO, have not repaid a penny as my savings are comfortably earning more than my mortgage is costing me, I would be crazy to do so.

If I were a lender I would rather have an IO borrower with 50% ltv than a repayment borrower with 75% ltv.

Thrugelmir

michaels wrote: »

Sorry but I think this is !!!!!!!! - 600k IO mortgages will apparently expire in the next 10 years - most mortgages run for 20 or 25 years so it is unlikely that many of these will see negative equity so how is a person who has rented from the bank for 20-25 years in any worse a position than someone who has rented from a landlord?

I am IO, have not repaid a penny as my savings are comfortably earning more than my mortgage is costing me, I would be crazy to do so.

If I were a lender I would rather have an IO borrower with 50% ltv than a repayment borrower with 75% ltv.

You are expressing a personal view. One for a multitude of different reasons lenders don't share.

Simon_gloster

The_J wrote: »

Interest only lending is finished. 12 months tops.

Blimey thats optimistic J. I give it the Olympics at best for most.

Even today it seems impossible to get an IO mortgage. £50k min or £1m pension fund depending who you go to.

Someone on the thread said about a £600k mortgage. That may be ok for your cicumstance and you may be fortunate in that respect.

However, I have had people in tears in the past thinking their mortgage ends next year etc. Ok advice at that time blah blah blah, but a line has to be drawn so lenders are goibg for the preferred route of guaranteeing a debt is repaid (repayment) should the mortgagor meet the payments.

Who will be the first lender to stop all io lending through all channels? Answers on an expensively stamped postcard.

Thrugelmir

Simon_gloster wrote: »

Who will be the first lender to stop all io lending through all channels? Answers on an expensively stamped postcard.

On the basis that a provable and reviewable repayment vehicle of a kind will become a basic requirement. Then interest only mortgages as the majority of people view them are over.

The maturing endowment peak has yet to hit. With many people having unfunded shortfalls.

michaels

Thrugelmir wrote: »

You are expressing a personal view. One for a multitude of different reasons lenders don't share.

So as a lender why is it better for the borrower to have less skin in the game but be paying off a tiny slice of the equity each year than for them to have a much larger capital cushion that is not being chiped away at?

With a 25 year mortgage taken at 75% how many years is it until the ltv is down to 50%?

RenovationMan

A bit of sense is now starting to creep into the mindset of the mortgage lenders. Instead of banning IO mortgages out of hand due to the higher admin costs of checking repayment vehicles, they are looking for ways to allow the financially savvy to keep IO mortgages.

This initiative, comparable with Santander's 50% minimum LTV, is a good solution to the heavy hand of the FSA. What the banks are doing are acknowledging that not everyone is living hand to mouth or using IO to buy houses they would otherwise not have afforded and that IO mortgages are a useful tool for many higher paid individuals to allow them to manage their investments more effectively.

RenovationMan

Thrugelmir wrote: »

I've asked you many times but you've yet "to prove" your argument. What works for you (at the moment) , may not for many people.

Assets prices are only high due to QE (on a global scale). The prop will be removed at some point.

I'm not surprised you've asked this 'many times' without receiving reply. How can someone prove to you that what works for them will work for someone else? I see from your reply to michaels that you dismiss actual 'personal' cases so you seem to want a theoretic example that will work for all cases.

Naturally this is not possible because one financial product works well for one person and not so well for another, depending on their own individual circumstances. Naturally you know that your question cannot be answered to your own level of acceptability and so I suggest that's the point of the question.

Simon_gloster

Good points made this morning, this element of mortgage lending is now over a Thur said, so we better get used to it.

I'm just wondering if assisgnment of policies to mortgages will come back in a funny way!!

What is known, and how lenders will get around this loophole I have no idea, if a borrower took an IO mortgage out prior to the lenders IO policy rule changes, and wants to port IO without a VTR, technically cust can have this as it was agreed on old rules.

So what I am saying is if michaels took his £600K mortgage in 2005 on IO, wants to move debt for debt on IO, lenders should now start asking all customers for proof of vehicles as opposed to just new 'cash' lending.

Simon_gloster

With a 25 year mortgage taken at 75% how many years is it until the ltv is down to 50%?[/QUOTE]

I have no idea, the speculation of property increase or decrease is an unacceptable form of vehicle to repay in todays mortgage society.

The_J

RenovationMan wrote: »

A bit of sense is now starting to creep into the mindset of the mortgage lenders. Instead of banning IO mortgages out of hand due to the higher admin costs of checking repayment vehicles, they are looking for ways to allow the financially savvy to keep IO mortgages.

1) Sense is not creeping in. The FSA are threatening mortgage lenders with the responsibility if IO mortgages are not provided with due diligence. The only people who will complain about their IO mortgage are the ones with high LTV who cannot "downsize" at the end of the term. That is the only reason they are cutting the LTV. You think they've suddenly realised what IO is and does? Don't make me laugh. This is purely about avoiding future litigation.
2) Checking repayment vehicles add minimal admin costs. The reason is as per (1), why take a risk when you can simply avoid it entirely?
3) They are certainly not leaving interest only to the financially savvy. Is it financially savvy to have a £1m pension pot? Is it financially savvy to expect your ISA to lose 20% of it's value over the term of the mortgage?