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

shortchanged_2

What I actually find quite scary is how much of the market is now on IO mortgages, 35%.

And you can be sure there is a significant number of these who have no repayment vehicles or other means of paying the capital off, even if this is denied by many on here.

I would imagine that most of the property rampers are on IO mortgages because they need the HPI to make their gamble pay off.

FTBFun

shortchanged wrote: »

I would imagine that most of the property rampers are on IO mortgages because they need the HPI to make their gamble pay off.

"I've got an excellent business plan - buy a property and then post messages on internet forums about how house prices will shoot up!"

Can't see it myself.

shortchanged_2

FTBFun wrote: »

"I've got an excellent business plan - buy a property and then post messages on internet forums about how house prices will shoot up!"

Can't see it myself.

You don't have to post on the internet to be a ramper.

It's a position on how you think.

I'd wager a large amount of money that if you carried out a survey of all people with IO mortgages and asked them if they wanted property prices to rise you'd get almost 100% yes.

Carl31

some of the comments i have seen on the subject are from people on IO mortgages, bragging how low their cost is in comparison to a rent on the same property. The worry is, people are looking at the monthly cost, instead of the overall cost. If they continue down the IO route, should their house fall into negative equity, they will have some serious problems later on

pinkteapot

shortchanged wrote: »

What I actually find quite scary is how much of the market is now on IO mortgages, 35%.

I was surprised by that number in the article too. 35% of all mortgages are IO? Really?

I'm too young to remember the endowment scandal properly. Am I right in thinking though that when IO mortgages were previously sold heavily (1980s?), people took out endowment policies at the same time - the theory being that the endowment would pay off the mortgage (though in reality they were too small to do so).

Is it me, or has the same IO mortgage boom been seen again, but this time with no product being sold alongside it to pay off the capital?

DervProf

From the article.....

Dee Wadham has a £68K mortgage, for which she pays £185 per month (I make that a rate of around 3.3%).

She earns £17k a year, making her monthly take home pay ~£1100 (?).

The article states that there is no way she could afford to pay more !

Where do I start ? Is the article, or the woman for real ?

If she's struggling with a rate of 3.3%, then I think she is right to be concerned about the future.

And does £185 really wipe out a large chunk of her take home pay ? :rotfl:

What a poor article.

shortchanged_2

pinkteapot wrote: »

Is it me, or has the same IO mortgage boom been seen again, but this time with no product being sold alongside it to pay off the capital?

I think you've hit the nail on the head there pinkteapot. But as I stated before there are many who are desperate not to admit this problem exists.

kabayiri

Is there a lot of difference between an IO only mortgage and a mortgage 'secured against' poor performing endowments?

Both situations leave the customer exposed.

I have a couple of endowments taken on 25 year terms, dating back to the time when endowments seemed viable. If I had to rely on them to cover a mortgage I'd be in trouble.

Interestingly, the paperwork accompanying the statement still illustrates growth predictions based on 3, 4 and 5%+ rates. This is fantasy island figures of growth in the short term.

How many I wonder are relying on endowments from the late 80s/early 90s ?

DervProf

kabayiri wrote: »

Both situations leave the customer exposed.

True, but one leaves the customer's trousers round their ankles, the other around their knees.

The endowment issue has been known for quite a while now, and I would think that a customer who took out an endowment is more likely to be wise and able enough to "bridge the gap" than someone who took out IO and hasn't paid much/any of the capital back.

shortchanged_2

DervProf wrote: »

True, but one leaves the customer's trousers round their ankles, the other around their knees.

The endowment issue has been known for quite a while now, and I would think that a customer who took out an endowment is more likely to be wise and able enough to "bridge the gap" than someone who took out IO and hasn't paid much/any of the capital back.

Well lets face it. People who took out endowment mortgages at least had the right intentions.
Many people who more recently took out IO mortgages where doing so on no more than a wing and a prayer and a hope of HPI.