Person of Interest Only

lemonjelly

Sounds a little (in my very limited knowledge) like a means to sell loads of miracle endowment style policies. Didn't we try that once? Didn't the repayment vehicles turn out to be worth less than the original promises made?

No doubt someone will find a way to market this...

IveSeenTheLight

Generali wrote: »

This is unlikely to result in higher house prices in the South East. It is also unlikely to result in more houses being built in the South East which is very bad news.[/LEFT]

Theoretically them, if the population continues to increase in the South East with no increase in properties, assuming there not an increase in prices (less trading), what would you propose would be the impact to rental properties?

Conrad

Generali wrote: »

Basically yes. The FSA has said that there are to be no more new interest only mortgages without a suitable means of repayment.

The wording they use is that the plans to repay must be plausible. It is not prescriptive as to repayment vehicles.

The problem is though that lenders are taking no chances and in the main now require site of an ISA (a fairly risky vehicle incidently).

This is clumsy. Many clients have perfectly valid investments, some would argue far more secure than some stocks n shares ISA, but in the main these other assets are largely not acceptable now. For example a business premises.

This nannying has many downsides in the same way the age restrictions do, particularly for an older divorcing applicant.

Conrad

Incidentally I am finding in terms of new home purchase mortgages, that people are taking longer term repayment mortgages in order to make the payments affordable. 35 years is becomming the norm.

The other effect I am seeing is rapidly rising rents as more and more restrictions are placed on the mortgage market.

The Government seem blissfuly unaware of the dampening effects of FSA regulation. My MP has sent my letter on this to the Chancellor. Straight in the bin I expect.

Pimperne1

MacMickster wrote: »

So in 1989 the average house price in the south-east was roughly £100K but is now around £225K.

Now the average house isn’t usually bought by younger first-time buyers. Typically the average house would be bought by someone in their mid-30s, who would be approaching 60 at the end of a 25 year term.

Good luck to those “homewowners” approaching retirement who, in 2014, may be forced to sell to repay their interest-only loan then, after selling costs etc find another home to buy with their £120K equity.

No problems at all.

Maybe they could just (wait for it) rent? £120k in the bank, I think that's the kind of tenant I would be happy with. The alternative is someone who has been in rented accommodation for the duration who has more likely much less in the bank. Lets face if, if they were not canny enough to buy a property they are not likely to have been canny enough to save large amounts of cash.

Loughton_Monkey

Pimperne1 wrote: »

Maybe they could just (wait for it) rent? £120k in the bank, I think that's the kind of tenant I would be happy with. The alternative is someone who has been in rented accommodation for the duration who has more likely much less in the bank. Lets face if, if they were not canny enough to buy a property they are not likely to have been canny enough to save large amounts of cash.

Out of £120K, a 65 year old would 'safely' be able to draw down roughly £350 a month on that, rising with modest inflation for the rest of his life. One wonders what would be the worst sh**hole. A £120K house, or a £350 pcm rental.

Pimperne1

Loughton_Monkey wrote: »

Out of £120K, a 65 year old would 'safely' be able to draw down roughly £350 a month on that, rising with modest inflation for the rest of his life. One wonders what would be the worst sh**hole. A £120K house, or a £350 pcm rental.

Absolutely, and that's £350 more than a retired long term renter will be able to front up with.

This story ought to be, "People who thought they would be able to live in their own home for the rest of their lives might not be able to. Unfortunately for them it seems that they will have to sell their home and will only have £120k more than the average renter to put toward renting another".

I really don't know what this has to do with Moody's. Shouldn't they be concentrating on people or a country's credit rating?

Loughton_Monkey

shortchanged wrote: »

Were people actually tortured into submission to take out these mortgages then?

This is more serious than I first thought.

There actually was a time when people were tortured. Rather less from the lender [although 'nice' pressure to take one because of all the endowment commission], but more from the Life Assurance salesman.

Personally, I'm not complaining though. I bought 7 conventional with profits endowments. Respectively, they delivered the following multiples of the desired maturity value: 3.77,2.65,2.45,2.02,1.5,1.4,1.23

I spent all the maturity value on other things, though, leaving the mortgage to 'mature' on its own. Mortgages eventually deflate away to 'petty cash'.

Loughton_Monkey

Generali wrote: »

.....a spot of bother that could spread to rather a large puddle of bother.

I insist we have an inquiry. And a probe, and a judicial inquiry into the probe. Then the BOE should investigate, and an FSA probe would also be helpful. After that, we can publicly flog them.

Graham_Devon

Isn't the underlying picture here exactly what many suggested interest only (in the main) was used for?

The bigger the percentage in the area of IO loan, generally the more expensive the area....suggesting people took IO as a way of affording the monthly payments.