MSE News: Nationwide axes interest-only mortgages

Equaliser123

opinions4u wrote: »

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

Because I pay tax on the rental income and would pay capital gains tax on the profit of any sale.

Neither of which apply to owner-occupiers.

dave333

Although interest only mortgages are not a good idea for those who aren't sensible with their money, they can be a really useful way for first time buyers to get on the property market.

My wife and I took out an interest only mortgage and as our salaries have risen over the last few years we have paid off more and more of the capital.

It just seems a shame that a valuable mortgage feature is being removed because a % of the population are incapable of managing their own finances!!

Thrugelmir

Pincher wrote: »

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.

And after 5 years?

leveller2911

dave333 wrote: »

Although interest only mortgages are not a good idea for those who aren't sensible with their money, they can be a really useful way for first time buyers to get on the property market.

My wife and I took out an interest only mortgage and as our salaries have risen over the last few years we have paid off more and more of the capital.

It just seems a shame that a valuable mortgage feature is being removed because a % of the population are incapable of managing their own finances!!

How can the banks determin exactly who is sensible with money?.

Just because someone manages to save up a few thousand pounds as a deposit(or gifted deposit) doesn't mean they wouldn't dip into their mortgage capital repayment vehicle if they needed to, for instance unemployment,paying their childrens uni fees etc.

You mention FTB, why is it particularly good other than the fact that they can't afford to buy a house on a repayment morgage?. Maybe,just maybe in general they rely on HPI for any equity hoping this will pay off their mortgage debt. Maybe house prices are far to high and need to come down to be affordable.

Pincher

Thrugelmir wrote: »

And after 5 years?

What about after 3 months?

Only Credit Unions are obliged to lend from deposits only.

After the typical 3 year initial deal period (fixed,discount ,tracker), because they borrowed from the market in a 3 year deal or issued a 3 year bond, they have to pay the money back. The rollover amount is totally unpredictable, because the pesky borrower has been overpaying, and naughty naughty, REDEEMING by moving to another lender.

Once the initial deal has finished, the mortgage goes SVR or tracker, the lender just has to rollover every three months. This is the obvious way to manage the ever reducing amount owing of a repayment set up.

No money has been alllocated beyond the initial deal period.

If the lender actually had the money allocated for 25 years, they would look very silly indeed.

Eellogofusciouhipoppokunu

If we are moving towards 'nanny state' style lending where people can't be trusted to manage their own finances (and take the consequences when they mismanage them) then we should also look at other things people shouldn't be allowed to do, such as mortgage equity withdrawal.

I personally believe that allowing people to take equity out of their homes is by far a more dangerous activity than allowing IO mortgages.

plane_boy2000

IO as a product has its place in the market.

We used an IO mortgage to enable us to get into a bigger house while we had babies - now the kids are at school our income has increased so we are able to afford higher payments

tifo

£150,000 minimum deposit? That's 100% of a lot of houses ....

DaiJoA

Can anyone advise as to what will happen in our situation? We have an part-interest part-repayment mortgage with Nationwide, it was on fixed rate and has now gone onto the SVR. We have a endowment policy started right back in 1992, which is on track, and always has been, to pay out the right amount to pay the £69k owed - there are approximately 8 years left on the policy and the cash-in value is around £19k.

There is £100k equity in the house, which we have owned since 2000.

At the moment we can afford the SVR payment per month. As low earners however, and with my husband being self-employed, we would never either get offered or be able to afford a repayment-only mortgage.

Will we never be able to have another fixed rate part-interest, part-repayment only mortgage?

This seems incredibly unfair. As Nationwide customers, we are yet to receive any kind of letter or notification about this or any kind of advice as to our situation.

Any help gratefully received.

Eellogofusciouhipoppokunu

DaiJoA wrote: »

Can anyone advise as to what will happen in our situation? We have an part-interest part-repayment mortgage with Nationwide, it was on fixed rate and has now gone onto the SVR. We have a endowment policy started right back in 1992, which is on track, and always has been, to pay out the right amount to pay the £69k owed - there are approximately 8 years left on the policy and the cash-in value is around £19k.

There is £100k equity in the house, which we have owned since 2000.

At the moment we can afford the SVR payment per month. As low earners however, and with my husband being self-employed, we would never either get offered or be able to afford a repayment-only mortgage.

Will we never be able to have another fixed rate part-interest, part-repayment only mortgage?

This seems incredibly unfair. As Nationwide customers, we are yet to receive any kind of letter or notification about this or any kind of advice as to our situation.

Any help gratefully received.

Another example of the majority of sensible borrowers being hit because a very small minority of borrowers are incapable of understanding basic finances.

If I were you, I'd contact Nationwide and see what the situation is for existing mortgage holders. If they are not flexible and you struggle to find another IO lender, you may have to take on a full repayment product and make a huge overpayment in 8 years time when your endowment matures.