MSE News: Nationwide axes interest-only mortgages

Thrugelmir

jimjames wrote: »

And what about the people who can't buy/don't want to buy that are able to rent thanks to landlords providing property?

Will the NW switch its BTL to the same terms?

Now that would shake the tree to its roots. .

Pincher

brit1234 wrote: »

Tax money which could pay down our deficit and protect public services from cuts.


Buy to let tax advantages with interest only create an unfair advantage over first time buyers when buying properties. Get rid of them and create a fair playing field for all.

I have always thought it is plainly unfair that car leasing companies manage to get:

1. Fleet discount
2. Tax deductible against depreciation (or is it capital allowance?)
3. Cost of servicing the cars

Do I get 30% discount?
Can I claim the £5,000 depreciation after three years of private ownership?
£300 a year servicing, not deductible against my income.

If I was ever to get engaged, I also think the 200% mark up on the diamond is extortion.

It's a business, and the interest is clearly the single most significant cost of doing business in BTL. What you are asking for is like saying a car leasing company shouldn't be able to claim the capital loss on a car against tax.

Pincher

Thrugelmir wrote: »

Banks make a profit margin on lending money. Not speculating with depositers money.

Capital solvency requirements (Basle 3) are no doubt underpinning the move.

The house will lose 70% of its value in 25 years,
but if it was on a repayment mortgage, we will be laughing,
because we got all our money back.

Does that sound paranoid or crazy to you?

Thrugelmir

Pincher wrote: »

The house will lose 70% of its value in 25 years,
but if it was on a repayment mortgage, we will be laughing,
because we got all our money back.

Does that sound paranoid or crazy to you?

Has nothing to with asset values. More to do with banks having the funds to support mortgage lending even at current levels of exposure.

Iain_L

Disagree with the blanket sentiment that this is good news. Not good news for me at all.

Our fix (which is part repayment, part interest only) comes to an end shortly so we're looking at re-mortgage options. I have endowments with significant guaranteed maturity values (more than covering the interest only portion), maturing in 4 years time. We have been paying extra on our mortgage whilst in a good job, but I was issued this week with a notice that my job is under redundancy threat.

I have no issue with reducing my monthly payments over the next four years by part repayment/part interest only if it means we get to keep our house. Interest only is not always a bad thing if people are sensible.

Equaliser123

brit1234 wrote: »

Tax money which could pay down our deficit and protect public services from cuts.


Buy to let tax advantages with interest only create an unfair advantage over first time buyers when buying properties. Get rid of them and create a fair playing field for all.

Sorry, I don't subscribe to that socialist rubbish.

Pay a huge amount of tax thanks.

opinions4u

Equaliser123 wrote: »

Sorry, I don't subscribe to that socialist rubbish.

Pay a huge amount of tax thanks.

Although there is little doubt that BTL, interest only, sub-prime etc (often all three for the same loan) have all contributed to excessive increases in property values.

Now that may have been driven by excessive supply of mortgage funds but in all cases those price rises have made life tougher for first time buyers to the point of excluding them from the market.

I'm not convinced that the BTL revolution has been a good thing for society. Owner-occupation should be a cornerstone of Government social policy. BTL inhibits that by affecting the market dynamics.

Why should a speculative investment by a landlord attract tax relief when mortgage interest for the owner occupier doesn't?

The market is currently unwinding itself, but it's a slow process. Removing interest only mortgages is part of that process. Hopefully those repayments will, eventually, free up the supply of funds for new mortgages to owner-occupiers, especially first time buyers.

The more people who own their own homes the better for society and the economy. BTL makes this harder to achieve. Perhaps the tax breaks on home ownership do need reviewing. I certainly don't see breaking down the barriers to home ownership as socialist rubbish. Much more aligned to Thatcher?

JimmyTheWig

Pincher wrote: »

How can they possibly think they will lose money when the LTV is 50%!?

I don't think they think they'll lose money. I think it is more about being seen to be lending responsibly.
It is nigh-on impossible for a bank to ensure that a borrower can repay the capital at the end of an interest-only mortgage. Most will be able to, but the few that can't will be seen as irresponsibly lent.
The bank will make nearly as much money on a repayment mortgage as an interest only mortgage and will be less likely to be accused of lending irresponsibly. That's why I think they are making this move.

P.S. I don't think the banks actually care much about whether they lend responsibly or irresponsibly. They certainly haven't seemed to care in the past and I don't see why that would have changed now. But I do think that they care that they are seen to be lending responsibly.

P.P.S. I would stand to lose out on these plans as I currently have a responsible interest-only mortgage. But I don't think that's the point.

Pincher

opinions4u wrote: »

Owner-occupation should be a cornerstone of Government social policy. BTL inhibits that by affecting the market dynamics.

Owner occupation is very costly and inefficient for a mobile workforce. "I can't move until I sell my house, so I can't take your job." Every time you move, the sell-buy-move process is time consuming, hair-tearing and filling a bottomless pit of fees and charges: stamp duty, mortgage arrangement fee, solicitor, surveyor, estate agent commission, need I go on?

If we had a German Letting culture, with well established protocols, then moving will be less stressful, and cost a LOT LESS.

The reason people don't want to rent is because so many landlords are petty money pinching weasels, and the tenants are slimy slippery
snakes.

The answer is to make me emperor, and I will create an Accomodation Office, with powers to investigate and confiscate substandard housing, incarcerate and execute rogue landlords. All rent will be paid into a Central Rent Control Department, and we will evict and incarcerate rent dodgers, confiscate their property, and press gang them into forced labour camps.

opinions4u wrote: »

Why should a speculative investment by a landlord attract tax relief when mortgage interest for the owner occupier doesn't?

What investment is NOT speculative?
If you borrowed money to open a cafe on a High Street, you are using an apartment sized space. There's income and outgoings, and you WILL use as much tax deductibles as you can just to keep your business going.

opinions4u wrote: »

The more people who own their own homes the better for society and the economy. BTL makes this harder to achieve. Perhaps the tax breaks on home ownership do need reviewing.

For the economy?

You mean the aforementioned bottomless pit of fees and charges: stamp duty, mortgage arrangement fee, solicitor, surveyor, estate agent commission, etc.? If it was me, I would rather keep the money and spend it on a nicer car, or a tasty restaurant, which is still helping the economy.

Pincher

Thrugelmir wrote: »

Has nothing to with asset values. More to do with banks having the funds to support mortgage lending even at current levels of exposure.

If they have £200k to lend on a repayment basis, I don't see why they can't lend on a interest only basis. In the first 5 years, the principal repaid is not that much.

JimmyTheWig wrote: »

I don't think they think they'll lose money. I think it is more about being seen to be lending responsibly.

P.P.S. I would stand to lose out on these plans as I currently have a responsible interest only mortgage. But I don't think that's the point.

So, just because there is some public misconception, a perfectly good financial planniing instrument is out of bounds to people who need it. There are people who will come into inheritance, maturing investment, pension lump sum, etc. who are cash poor in the medium term, but are perfectly matched to interest only.

No, you must go on repayment, because nanny knows best.