Is interest-only really a ticking time-bomb?

abaxas

ukcarper wrote: »

I suppose it all depends on amount of equity and type of house if you are a couple you will only get the LHA for 1 bedroom so if you are currently living in a 3 bed house with a reasonable amount of equity you might be able to downsize.

Agreed,

The issue is still the point of mortgage completion, if you have not moved by then, you may be in a situation where you simply cannot.

Emy1501

FSA recently suggested that there was 150K mortgages per year to come to term over the next 10 years and something like 70% had no repayment tool.

I suspect no one really knows whether the problems is going to be a ticking time bomb and only time will tell. I suspect only the owners of the these mortgages know whether they either have the capital to pay the mortgage off or are prepared to downsize if they dont. We also don't know how may would be able to get a further mortgage or are happy to get an equity release scheme. Also who knows how the avergae lender will treat these people.

I suspect we will start to get a picture over the next couple of years.

michaels

So are you disputing the numbers in the report that suggest that only 6,000 mortgages have less than 10% equity?

grizzly1911 wrote: »

Providing the interest can be 1.)serviced and 2.)new mortgaes found or the original repaid - No.

Just a problem if 1.) or 2.) fall over as they are increasingly likely to do with the current economic climate.

Investment returns on repayment vehicles are often not guaranteed if not watched.

RenovationMan

Oh. Interest only mortgages. Again.

I don't know, it just seems so futile.

nearlynew

A very large majority of people who take out IO mortgages do so to reduce the monthly payment so they can move into (not buy) a home which they otherwise could not afford.
This is 100% fact.

And therefore, having stretched themselves as far as they can, they cannot also afford to put money aside for a repayment vehicle.

Of all the so-called "ticking time bombs" mentioned on here, this really is a big one which could spell disaster for an awful lot of people..

Old_Git

I have an IO mortgage .I Stopped making repayments to reduce the loan and stayed with interest only .I put the money into an ISA .The Isa pays 3.05% the mortgage interest rate is 0.68% .I just keep maxing the ISA .I also have an endowment with 4 years to run .

robmatic

nearlynew wrote: »

A very large majority of people who take out IO mortgages do so to reduce the monthly payment so they can move into (not buy) a home which they otherwise could not afford.
This is 100% fact.

And therefore, having stretched themselves as far as they can, they cannot also afford to put money aside for a repayment vehicle.

Of all the so-called "ticking time bombs" mentioned on here, this really is a big one which could spell disaster for an awful lot of people..

Reading threads like this makes me all nostalgic... it's like the last 5 years haven't happened.

There are very few new IO mortgage holders.

Those people who stretched themselves pre credit crunch to the limits of affordability, well, they are no longer stretched due to SVRs being lower than their initial mortgage rate.

Old_Git

nearlynew wrote: »

A very large majority of people who take out IO mortgages do so to reduce the monthly payment so they can move into (not buy) a home which they otherwise could not afford.
This is 100% fact.

I did this with my first house plus we where encouraged to buy endowment policy

noh

I too have an interest only mortgage,
It is an offeset mortgage. For some time it sat there 100% offset. When the interest rate dropped to 1.5% I withdrew the full balance and put it in savings accounts.
I suspect I'm not alone.

michaels

Your1 00% facts seem to disagree with the facts quoted in the original post which suggest that almost all IO mortgage holders have at least some equity in their properties.

nearlynew wrote: »

A very large majority of people who take out IO mortgages do so to reduce the monthly payment so they can move into (not buy) a home which they otherwise could not afford.
This is 100% fact.

And therefore, having stretched themselves as far as they can, they cannot also afford to put money aside for a repayment vehicle.

Of all the so-called "ticking time bombs" mentioned on here, this really is a big one which could spell disaster for an awful lot of people..