Interest-only mortgage borrowers forced on to more expensive repayment plans

ukcarper

Thrugelmir wrote: »

The interest earnt is outweighed by the cost of administration involved in dealing with customers like this.

Have you any evidence to back that up they would probably be on the banks least attractive rate and the risk to the bank is very low.

Graham_Devon

ukcarper wrote: »

Have you any evidence to back that up they would probably be on the banks least attractive rate and the risk to the bank is very low.

Trouble is, that's not what banks are for.

It's also less money lent out to other people, as money is tied up with a customer way beyond the original term.

Banks cannot project if it comes down to this sort of situation.

ukcarper

Graham_Devon wrote: »

Trouble is, that's not what banks are for.

It's also less money lent out to other people, as money is tied up with a customer way beyond the original term.

Banks cannot project if it comes down to this sort of situation.

True but they would be quite happy to give her equity release tieing up more money.

The only the thing banks are interested in is making money.

zzzLazyDaisy

HAMISH_MCTAVISH wrote: »

Oh dear....

They might almost have to pay as much per month for the same property as a renter would.

How very awful for them.....

The thing is, if they were renting and couldn't afford that amount of rent, they may be entitled to LHA/HB. But they are unlikely to get any help with a mortgage.

As for whether this arrangement is profitable or not for the lender.... he had a contract with them, it ended, and the lender has chosen to call in the debt as it is entitled to do. I know I am a lawyer and our brains are wired differently to 'normal' people <wink> but it isn't about morals or charity, or being nice. This is a commercial agreement and the borrower has gambled on the lender extending the mortgage indefinitely and lost. They will now have to take a lodger/borrow from relatives/sell the house or whatever is necessary to pay their debts or eventually the house will be repossessed.

HAMISH_MCTAVISH

zzzLazyDaisy wrote: »

The thing is, if they were renting and couldn't afford that amount of rent, they may be entitled to LHA/HB. But they are unlikely to get any help with a mortgage

Entirely depends on circumstance.

SMI covers a variety of situations, and indeed, a number of pensioners seem to be on it indefinitely.

But my point was really aimed at the uplift in mortgage payments noted in the OP. For most people, mortgage payments even with such an uplift would still be less than rent in a comparable property.

michaels

Plus why would a bank roll over a mortgage unless they were protected by equity? Sell to rent and this equity no doubt means no housing benefit.

NOW PLEASE one of the many who have stated it as fact. Why is paying less to rent from the bank (IO mortgage) a worse option than paying more to rent from a private landlord? Please use simple words and short sentances as despite you all stating it as a fact many times i still do not understand it.

DpchMd

michaels wrote: »

despite you all stating it as a fact many times

Link us to some of these many posts and we'll see if there was a misunderstanding.

Generali

michaels wrote: »

Plus why would a bank roll over a mortgage unless they were protected by equity? Sell to rent and this equity no doubt means no housing benefit.

NOW PLEASE one of the many who have stated it as fact. Why is paying less to rent from the bank (IO mortgage) a worse option than paying more to rent from a private landlord? Please use simple words and short sentances as despite you all stating it as a fact many times i still do not understand it.

It's a worse option for the bank! If someone has signed up to an I/O mortgage including a promise that there will be a repayment vehicle in place to repay on dd/mm/yy+25 then the bank's risk modeling will include that.

Clearly there are many who seem to think, 'we bailed out the banks, they need to sort their own problems out'. Well this is part of the process of banks reducing risk; unwinding some of the lending excesses of the early C21st. It's not possible to have lax lending standards and the new ultra-low risk bank model.

Lax lending means lending interest only, lending > 60% LTV and lending to small businesses. This isn't a result of the credit crunch, it's the way that things will be forever if regulators get their way.

HAMISH_MCTAVISH

michaels wrote: »

Why is paying less to rent from the bank (IO mortgage) a worse option than paying more to rent from a private landlord? .

Because if people keep doing it, they don't get their house price crash.

michaels

Generali wrote: »

It's a worse option for the bank! If someone has signed up to an I/O mortgage including a promise that there will be a repayment vehicle in place to repay on dd/mm/yy+25 then the bank's risk modeling will include that.

Clearly there are many who seem to think, 'we bailed out the banks, they need to sort their own problems out'. Well this is part of the process of banks reducing risk; unwinding some of the lending excesses of the early C21st. It's not possible to have lax lending standards and the new ultra-low risk bank model.

Lax lending means lending interest only, lending > 60% LTV and lending to small businesses. This isn't a result of the credit crunch, it's the way that things will be forever if regulators get their way.

Are there many 25 year periods over which the price of housing (in nominal terms) has not risen by at least 2/3rds thus meaning that at the end of the term the banks are not safely protected by equity even if there was no equity at the start of the loan?