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

DervProf

wotsthat wrote: »

Yes they are - he's part of the 'ticking time bomb'. Actually I think we'll call the autobiography 'Renoman and the ticking time bomb'. An inspring true tale of a massive financial gamble taken against the backdrop of economic turmoil and horribly high petrol prices.

Will it work out? What's best - a more efficient boiler or additional insulation? Will he go to heaven? You'll need to buy the book to find out.

In the film version it'll be pimped up a bit. Brad Pitt (playing Renoman) will have nightmares in which he has visons of his friends, the three amigos, Graham_Devon, Shortchanged and Dervprof begging him to convert to a repayment mortgage. I've not cast them yet but I'm looking for Jesus Christ lookalikes with sad slightly disapproving faces.

I've got an idea for another dream sequence involving Kirsty Allsop and Merryn Somerset Webb but it would blow the PG rating right out of the water.

This isn't just a post, it's an M & S post (probably sponsored by Carlsberg).

:T

ukcarper

shortchanged wrote: »

I doubt it but who knows.

Property is still overvalued in this country so I certainly don't see house prices rising 200 - 300% again like in the previous decade.

I can see that happening in nominal terms but not in real terms.

but as you say who knows

DervProf

Conrad wrote: »

My concern though is that this just puts ownership beyond the reach of even more people, great news again for landlords.

And mine.

That's why I'd like to see more control over BTL mortgage lending.

If the government are the ones who have influence over supply and building of domestic property, they should use their influence to decide how that property gets shared between the population.

No, I'm not suggesting that our lives should be run by the state, I am suggesting that the state could make our lives a little easier(not for the chancers and spivs). A FTBer should not have to compete against a BTL investor (and have to resort to using a mortgage broker to "get a foot on the ladder". That's the way it is for many people today, and some rule changes could ease the situation.

Joe_Bloggs

DervProf Said:-

Quote:
Originally Posted by Conrad
My concern though is that this just puts ownership beyond the reach of even more people, great news again for landlords.

And mine.

That's why I'd like to see more control over BTL mortgage lending.

If the government are the ones who have influence over supply and building of domestic property, they should use their influence to decide how that property gets shared between the population.

How can any government be in control in the supply and demand for domestic property ? Governments occasionally react but it is a trillion pound issue for a trillion pound economy. They can only tinker with it at the margins. Perhaps in an effort to court popularity, they appear to do something for a favoured few. The grand result is no net change unless I have missed something.
J_B.

RenovationMan

Thrugelmir wrote: »

Selective quote. What's the rise between 1999 and now?

Why is mine a 'selective quote' when I'm actually giving figures over a full mortgage term (25 years) as we were discussing rises over a full mortgage term (25 years), whereas you are using a selective quote from 1999 (a 13 year term) that bears no relation to what we are talking about?

I suggest you read posts and get up to speed with the discussion before you jump in like this and make a bit of a show of yourself.

To recap: we are talking about HPI over 25 years, not 10, 13 or even 20. As I said earlier I think the period is more like 30 years for most people as they move houses.

RenovationMan

wotsthat wrote: »

Yes they are - he's part of the 'ticking time bomb'. Actually I think we'll call the autobiography 'Renoman and the ticking time bomb'. An inspring true tale of a massive financial gamble taken against the backdrop of economic turmoil and horribly high petrol prices.

Will it work out? What's best - a more efficient boiler or additional insulation? Will he go to heaven? You'll need to buy the book to find out.

In the film version it'll be pimped up a bit. Brad Pitt (playing Renoman) will have nightmares in which he has visons of his friends, the three amigos, Graham_Devon, Shortchanged and Dervprof begging him to convert to a repayment mortgage. I've not cast them yet but I'm looking for Jesus Christ lookalikes with sad slightly disapproving faces.

I've got an idea for another dream sequence involving Kirsty Allsop and Merryn Somerset Webb but it would blow the PG rating right out of the water.

LOL, Brilliant. I particularly like the Brad Pitt casting.

In my head I have the Three Amigos cast as Danny Devito, Rick Moranis and Dudley Moore, as their MSE posts reveal them to have 'small man syndrome'. :rotfl:

Emy1501

wotsthat wrote: »

Well I hope that the FSA have more of a clue but they are dealing with the same incomplete information we are. I also doubt they have fully considered BTL mortgages where 65%(?) are IO.

The average mortgage holder is paying a touch over 3% interest (that was before the recent SVR rises mind). You don't need to be whizz kid to see that in many cases it would be irrational to make capital repayments.

Yes I want to believe that IO isn't a 'ticking time bomb' - doesn't everyone? It's not a complete guess though - the CML refuted the claims of the FSA and issued a very detailed report containing data that the FSA survey weren't able to consider before making their own conclusions.

last thing I saw from CML advised they were in agreement with the MMR and only concerns they had were regarding face to face dealing and that Lenders should have more consideration for mortgage prisoners.

I think you are a bit naive if you think the average mortgage holder is thinking alond the lines that rates are 3% and they can get a better rate in a savings account etc.

I suspect Conards comments regarding why many took IO mortgages is spot on and I suspect over the years more and more will want to complain when they reach the end of term and realise that they do not own their own their house.

The question for me is more about how these people will be dealt with especially in view of the fact that many of these people will not have an adequate pension either to pay of the debt in old age. Are people going to be willing to downsize? Are they going to go down the miss selling route etc

wotsthat

Emy1501 wrote: »

The question for me is more about how these people will be dealt with especially in view of the fact that many of these people will not have an adequate pension either to pay of the debt in old age. Are people going to be willing to downsize? Are they going to go down the miss selling route etc

Here's the CML doc http://www.cml.org.uk/cml/publications/newsandviews/110/411

There are 3.9m IO mortgages outstanding. I'd suggest we ignore any that are due to be repaid this decade as they have a "comfortable equity cushion" and have an average loan amount of well under £100,000. Even if they get to the end of the loan term without a penny to pay off the capital they should be able to downsize and still have a nice house.

That leaves 2.6m mortgages with an average loan size of £155,000. I'd also suggest that we could take out BTL loans that are related to BTL too. Not sure of the numbers but BTL loans that are on an IO basis are significant.

So the problem is already diminishing and it's going to get smaller..

- the 'danger' loans taken out in 2006/ 2007 will not need to be repaid until 2032. Inflation of 3.5% will halve the size of debt in real terms.

- lenders will become much less laissez faire about existing IO mortgages. Rather than just covering their ars*s by sending out a standard reminder every now and again they'll be more active in ensuring that repayment plans are being considered properly. The last thing they need is legal action against them with a mortgagee claiming they are jointly responsible for lending to them on an IO basis to start with. I can almost hear the MSE bandwagon revving up now.

- current IO mortgages are much tighter in terms of LTV's so anyone wanting to move and take their IO mortgage with them will get a very clear reminder that they have a debt to repay. Who takes a mortgage and still has it 25 years later - not many?

- circumstances change. There will be job changes, pay rises, bonuses, inheritances, pension lump sums help from families etc. etc.

- it seems inconceivable that in 20 years or so houses are not going to cost more than now giving a downsizing opportunity.

If, in spite, of the above there are hoardes of people unable to repay then we've got a problem.

Emy1501

wotsthat wrote: »

Here's the CML doc http://www.cml.org.uk/cml/publications/newsandviews/110/411

There are 3.9m IO mortgages outstanding. I'd suggest we ignore any that are due to be repaid this decade as they have a "comfortable equity cushion" and have an average loan amount of well under £100,000. Even if they get to the end of the loan term without a penny to pay off the capital they should be able to downsize and still have a nice house.

That leaves 2.6m mortgages with an average loan size of £155,000. I'd also suggest that we could take out BTL loans that are related to BTL too. Not sure of the numbers but BTL loans that are on an IO basis are significant.

So the problem is already diminishing and it's going to get smaller..

- the 'danger' loans taken out in 2006/ 2007 will not need to be repaid until 2032. Inflation of 3.5% will halve the size of debt in real terms.

- lenders will become much less laissez faire about existing IO mortgages. Rather than just covering their ars*s by sending out a standard reminder every now and again they'll be more active in ensuring that repayment plans are being considered properly. The last thing they need is legal action against them with a mortgagee claiming they are jointly responsible for lending to them on an IO basis to start with. I can almost hear the MSE bandwagon revving up now.

- current IO mortgages are much tighter in terms of LTV's so anyone wanting to move and take their IO mortgage with them will get a very clear reminder that they have a debt to repay. Who takes a mortgage and still has it 25 years later - not many?

- circumstances change. There will be job changes, pay rises, bonuses, inheritances, pension lump sums help from families etc. etc.

- it seems inconceivable that in 20 years or so houses are not going to cost more than now giving a downsizing opportunity.

If, in spite, of the above there are hoardes of people unable to repay then we've got a problem.

Article only seems suggests no time bomb over next few years.

It seems unclear after that. I suspect that if everyone is willing to and can downsize then there should be no real problem. I suspect though that there will be a fair few who took out their mortgages with little understanding that at the end of the term they would have to pay off the balance or downsize. I suspect also that there will be a fair few who wont want to downsize either.

I suspect unless things change then the IO problem will become an issue from 2020 onwards will also compound the problems of people not really saving for retirement.

nearlynew

A very large majority of people who take out IO mortgages do so because it is the only way they can afford the monthly payment.
This allows them to move into (not buy) a house that they could otherwise not afford.

Additionally, those that move from repayment to IO do so not because they are financially savvy but because they are financially f*cked.

100% guaranteed fact.