MSE News: Is the interest-only mortgage dead?

Former_MSE_Helen

This is the discussion thread for the following MSE News Story:

"Interest-only mortgages are so hard to come by, leading broker David Hollingworth to question if the market's dead"

Read the full story:
Is the interest-only mortgage dead?

Pincher

What's the point of borrowing money if I have to start giving it back straight away? You've lent me the money, let me use it, until the time is up. In this particular case, 25 years :cool:.

The_J

Mainly because people are too stupid to realise they have to pay it back. You only have to look at a thread on here where someone is absolving themselves of any blame and apportioning it all to the "unethical" lender.

I don't like the changes, they are being done for all the wrong reasons and will harm the UK mortgage market but if it stops these jumped up little twerps who take zero responsibility for their life choices from making the mistake in the first place then I will suffer it.

Alternatively they should make every mortgage an advised sale so that everyone has to speak to a financial adviser to arrange a mortgage. That way you only need to enforce the importance of explaining IO to everyone via the FA channel. That won't happen because the banks want to continue their non-advised sales route so they can continue to (mis)sell insurance to the masses.

thelawnet

Pincher wrote: »

What's the point of borrowing money if I have to start giving it back straight away? You've lent me the money, let me use it, until the time is up. In this particular case, 25 years :cool:.

And then you go whining that they want to repossess your house after 25 years.

Aussie-Pom

I've been over in the Land of Opportunity (Australia) where, in the mining sector, no one seems to know there's been a GFC. I recently contacted my bank in the UK to discuss rates (to my interest only mortgage). Seems they're not prepared to lend me money on the terms that they've already lent to me! Compared to Oz, UK property (or at least London) is so postively geared, its a no-brainer. And yet despite me having demonstrated that for 5 years, they now think its all too risky.

Its just like the sheople playing the stock market... The fluctuations are the fear/greed mongers constantly overreacting.

Aussie-Pom

thelawnet wrote: »

And then you go whining that they want to repossess your house after 25 years.

Well actually, thelawnet, if you can't get any growth out of a property in 25 years, I'd have to wonder what you've done to it. Land goes up even if you've smashed the building to bits.

The_J

Lending to Australian residents is fraught with legal technicalities anyway, that's probably part of the problem. You probably don't know the secret Pom password either that we use to weed out those who have gone native.

Conrad

Int only is a relevant a suitable product in many cases. Take for example a Woman aged 58 suddenly finding her 30 year marriage over.

She needs to buyout the existing property or find a new one.

Because of tough FSA rules on lending above 65, many such people are told they can only have a 7 year mortgage. Not an issue on int only as the payments are affordable, but on capital repayment she suddenly has nowhere to go and is forced to rent.

This is the blind nature of blanket rules. Remember over 99% of people do not get repossessed, so these rules are out of sync.

In the past, capable adults like out 58 yo would in all porbability managed perfectly well. For example carried on working past 65 in the past, perhaps met a new partner and then be in a position to pay down the int only capital, or gradualy made overpayments, perhaps been in line for an inheritance.

Now she will be forced to rent - and many other categories of applicant also needing int only are now denied and forced to rent instead.

Great all round for landlords.

brit1234

Lets hope it spreads to buy to let mortgages, they should all be repayment.

The_J

brit1234 wrote: »

Lets hope it spreads to buy to let mortgages, they should all be repayment.

a) They are not regulated by the FSA.
b) They are investments and as such could be sold to repay the balance borrowed.
c) They garner tax relief on the interest element, why would you reduce that?
d) If they were on repayment, who would pay higher prices. Tenants, who have nowhere else to go, or Landlords? Hmmm.

Your reputation for unbridled and spectacular ignorance is growing fast brit :money:

edit: You still haven't updated your house price signature to the March figures as I have asked you to do a number of times. It can't be because it showed house prices increasing could it brit? Or do you just ignore bad news?

chewback

brit1234 wrote: »

Lets hope it spreads to buy to let mortgages, they should all be repayment.

Why should they be?