Lazy repost - Interest only, the ticking timebomb say Daily Mail

DervProf

the_flying_pig wrote: »

A primary school friend of mine has had a mortgage for a while. I asked him if it was repayment or io. He said "what do you mean?" I asked him if the amount he owed stayed the same or whether it was going down. He said "don't know". I helped him check. It was io. He said he "chose the cheapest one" at the time.

And there we see an example of the level of financial understanding we have in this country. A good example of why IO mortgages should be used very sparingly.

Might be an idea for an IO mortgage applicant to take a test before their application is considered.

shortchanged_2

Conrad wrote: »

It's a lot less rosy of course, but on the other hand you would still find most that took I/O in say 2006, would still do the same again if the clock was rewound as it was thier only affordable option, and they still got to dwell in a place where they are more stability and autonomy than was the case when they were renting.

Funnily enough my only mortgage complaint relates to this. She was a Police Woman who took int only in 2006. She came back recently asserting she might claim for miselling, until I showed her the fact find notes (every page sighned by her) where her option was I/O or carry on renting and she at that time plumped to become an owner.
Because she had little deposit a repayment mortgage was not affordable - so what should I have advised her - stay in rented, unable to save and make a middle class landlord richer - is that good advice?

Thanks Conrad. If nothing else I admire your honesty.

wotsthat

shortchanged wrote: »

So what point do you think he is trying to make?

That the FSA don't need to worry about him?

I really couldn't see any other point being made.

Conrad

DervProf wrote: »

Yes, I can see that IO mortgages can work, but I also think that shouldn't be made widely available.

My concern though is that this just puts ownership beyond the reach of even more people, great news again for landlords. No longer will I come accross the lady who bought a home for £80k in 1995 on int only, that was able to totaly alter her life chances and capability from the fact her property went up to £300k.

What were saying is that someone like her THAT COULD NOT AFFORD A REPAYMENT MORTGAGE, is now never going to get the chance of such an equity journey.

Is that really a good thing, removing CHOICE from grown adults?

wotsthat

DervProf wrote: »

And there we see an example of the level of financial understanding we have in this country. A good example of why IO mortgages should be used very sparingly.

Might be an idea for an IO mortgage applicant to take a test before their application is considered.

The financial system shouldn't be run based on the stupidest people we can find.

shortchanged_2

wotsthat wrote: »

That the FSA don't need to worry about him?

I really couldn't see any other point being made.

:wall: Ok you win. I give up.

Conrad

DervProf wrote: »

And there we see an example of the level of financial understanding we have in this country. A good example of why IO mortgages should be used very sparingly.

Might be an idea for an IO mortgage applicant to take a test before their application is considered.

Yet we do allow millions to get obese and bring up kids the same way. No tests required.

Strange set of priorities we have - you can get diabetes, joint failure, high cholestoral and early death all you like, no tests required, but dont dare chance your arm with an interest only mortgage.

Conrad

wotsthat wrote: »

The financial system shouldn't be run based on the stupidest people we can find.

What I detect is a snobbery where some feel 'thickies' ought not to be given a chance, afterall, they might just make a pile of equity WITHOUT ANY EFFORT, whereas the mse elite had to work hard for thier money:beer:.

The vast majoiry with I/O down the years have done better than they ever would have renting. This point is totaly lost though.

shortchanged_2

Conrad wrote: »

The vast majoiry with I/O down the years have done better than they ever would have renting.

Thanks largely to rampant HPI over the previous decade, which now looks like it ain't going anywhere fast for some time.

ukcarper

shortchanged wrote: »

Thanks largely to rampant HPI over the previous decade, which now looks like it ain't going anywhere fast for some time.

Do you really think house prices will be where they are now in 20 years time in nominal terms.